For the past more than four months, Wall Street and investors have been taken on a historic journey. The panic and uncertainty associated with coronavirus disease 2019 (COVID-19) initially sent the widely followed S&P 500 it dropped a whopping 34% in just 33 calendar days. That is the fastest and steepest decline into bear market territory in history.
However, over the next 11 weeks, the S&P 500 benchmark recovered more than 80% of its losses, with technology focused Nasdaq compound galloping to new highs. And keep in mind that all of this has happened with the unemployment rate at the highest levels not seen since the Great Depression and the cases of COVID-19 rising in various U.S. states.
While the stock market has historically bottomed long before the US economy hit its lowest point, there are several reasons to believe that the current rally may fail and yield to yet another collapse. Even if it doesn’t, stock market crashes are an inevitable occurrence in the investment cycle. When the following occurs, use fear and panic selling to your advantage by buying the following seven major stocks at a discount.
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Amazon
Just in case you thought Amazon‘s (NASDAQ: AMZN) $ 1.4 trillion market cap means your high growth days are in the rearview mirror, think again. Amazon remains the lynchpin of the e-commerce space, with roughly 40% of the entire US e-commerce market share There is no doubt that it will continue to wield its power in the online retail arena and through its membership. Prime to keep consumers loyal and within their sphere of products and services.
But in the long run, Amazon’s growth story is about its cloud infrastructure services. Amazon Web Services (AWS) is growing at twice the rate of Amazon’s central retail segment, but has substantially higher margins. With more than $ 200 a share in Wall Street’s projected operating cash flow in 2023 (that’s nearly triple that of 2019), Amazon has a chance to easily release $ 5,000 a share, based on its historical multiple of its cash flow. operating cash.
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Square
Most people know Square (NYSE: SQ) for its point of sale platform. For years, Square built its ecosystem of vendors by forging relationships with small and medium-sized businesses. Although these small companies remain, the Square platform has become considerably more attractive to large companies. Based on annualized gross payment volume, more big companies are using Square’s ecosystem of sellers than ever, which is not a bad thing in a consumer-driven economy.
Square can also have a successful growth story on their hands with the Cash app. The peer-to-peer payment platform has been gaining users at an extraordinary rate: from 7 million in December 2017 to 24 million in December 2019. The ability to transfer funds to and from traditional bank accounts, invest directly from the app and link the Cash application to the Cash card to use as a debit card has caused the gross earnings of the Cash App to skyrocket. When the market fails again, you’ll want Square on your shopping list.
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Kirkland Lake Gold
Although tech stocks are all the rage right now, don’t overlook the gold mining industry, or more specifically, Kirkland Lake Gold (NYSE: KL), which benefits from company-specific and macro catalysts.
At a macro level, global bond yields have plummeted and central banks are injecting large amounts of money into their financial systems. In other words, panic and fear have made it virtually impossible for income seekers to make a lot of “safe” money. As long as yields stay close to record lows, physical gold will be seen as a very attractive store of value.
On a company-specific basis, Kirkland Lake Gold has the most pristine balance sheet in the entire industry – $ 531 million in cash and no debt – and recorded a total maintenance cost of $ 776 per ounce of gold in the first quarter. Based on current spot prices, Kirkland Lake is generating nearly $ 1,000 per ounce in cash operating margin. As an added bonus, the company doubled its dividend and repurchased nearly $ 330 million in shares in the first quarter.
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Intuitive surgical
When the stock market crashes, healthcare stocks are often a fairly safe place to park your money. This is why you need to have a surgical system developer. Intuitive surgical (NASDAQ: ISRG) on your shopping list. Intuitive has installed nearly 5,700 of its da Vinci systems worldwide over the past two decades, which is far more than all of its competitors combined. This means that you rarely have to worry about losing customers.
But as I have previously noted, the best thing about Intuitive Surgical is that its margins are designed to improve over time. Modeled after the razor business model, Intuitive Surgical’s da Vinci system is expensive ($ 0.5 million to $ 2.5 million), but it’s also expensive to build, so it produces only average margins. This company generates most of its margins by selling instruments with each procedure and by servicing its machines. As more da Vinci systems are installed, these higher margin segments will grow at a higher percentage of total sales.
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You lose the opportunity to buy in the Facebook growth story in the first innings? Don’t be afraid, because Pinterest (NYSE: PINS) it is giving investors a chance for redemption. While Pinterest’s 367 million monthly active users (MAU) pale in comparison to Facebook’s 2.6 billion, what really impresses Pinterest is the growth in MAU it’s generating from foreign users. Last year, the average international revenue per user doubled, and probably will do so a few more times this decade.
Pinterest’s nascent e-commerce platform could also become a serious growth story. Since the Pinterest platform is based on shared interests, it stands to reason that the company will monetize its platform by allowing small and medium businesses to engage with potentially specific consumers. Between advertising and e-commerce, a long-term sustained double-digit growth rate is possible.
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U.S. Bancorp
Although the highly cyclical banking industry is probably not the place where most investors would think to put their money to work when the stock market crashes, U.S. Bancorp‘s (NYSE: USB) Long-term performance will make even the most skeptical investors believers. You see, US Bancorp has avoided the risky investments that caused problems for the big banks over a decade ago, which has played a significant role in consistently producing the highest return on assets among the largest US banks by market capitalization.
US Bancorp has also benefited from the constant transition of consumers to digital banking and mobile applications. This has allowed the company to close branches to reduce its non-interest related expenses, which, in turn, has helped expand its results. US Bancorp is already at its cheapest valuation in a decade in terms of price to book value, and it has a solid track record of returning a large amount of capital to shareholders through dividends and share buybacks.
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Palo Alto nets
Finally, when the stock market crashes, look at the cyber security industry and a company like Palo Alto nets (NYSE: PANW) to be your rock Ultimately, no matter how well or poorly the economy is performing, cybersecurity is a necessary service. Especially now, with more people working from home due to COVID-19 concerns, the need to protect business clouds is greater than ever.
What makes Palo Alto Networks so intriguing is the company’s continued transformation to a subscription-focused service. By minimizing your reliance on firewall products, which can have bulky revenue recognition, and by focusing on high-margin subscriptions and service revenue, Palo Alto will see a noticeable increase in its operating margins over time. Although the short term could be a little uneven as the company heavily reinvests in innovation and additional acquisitions, the end result will be a greater share of the cloud protection solutions business market.
