5 stocks I own that I will add if the stock market crashes
JTypically, I like to set aside money in my portfolio so that I’m ready to buy stocks on my shopping list in the event of a stock market crash. Often the top of my list includes stocks that I already own. This is because I have already researched the companies and familiarized myself with the companies.
Here are the top five on the list to add if there is a large stock market crash that knocks my favorites down along with everything else.
At the start of the pandemic, the e-commerce retailer flourished, gaining millions of new customers. Some of them will leave when economies reopen, of course, but it will likely emerge from the pandemic with millions more customers than it started. And Amazon (NASDAQ: AMZN) has become much more than an e-commerce company. More than 50% of its operating revenue now comes from its web services segment, and advertising hit more than $30 billion in revenue in 2021.
The icing on the cake is that Amazon is selling at its lowest price-to-earnings (P/E) ratio in five years. A massive sell-off in the market could drive the price down even further.
This global travel facilitator was devastated at the start of the pandemic. But the management took the opportunity to prune unnecessary expenses and make the company more robust. The moves are paying off now, and Airbnb (NASDAQ: ABNB) is reporting record profits as economies reopen and people feel comfortable traveling again. Indeed, Airbnb’s revenue in 2021 was 25% higher than in 2019.
It is in an excellent position to thrive as the travel industry recovers from the pandemic. Airbnb is selling at a price-to-free-cash-flow (P/FCF) ratio near an all-time low.
Chegg (NYSE: CHGG) is an education technology company with a strong competitive edge. The company offers 75 million pieces of exclusive content that students find incredibly useful in their courses, so much so that it has registered 7.8 million subscribers, up 18% year-over-year.
The business is built on a profitable foundation and operating results have grown from a loss of $41 million in 2016 to a gain of $78 million in 2021. Content doubles as an acquisition tool at low cost when students come across Chegg when looking for help. with their studies.
Chegg is trading at a P/FCF ratio that is also close to its five-year low.
4. Alphabet letters
Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) needs no introduction. Google’s parent company has grown revenue at a compound annual rate of 20% over the past decade. The increase in sales has created a massive growth in operating profit from $13.8 billion in 2012 to $78.7 billion in 2021.
Even though the advertising giant made $257 billion in revenue in 2021, it still has room to grow. Marketers spent $763 billion on advertising in 2021, up 22.5% from 2020.
Alphabet is trading at a P/E ratio close to its five-year low.
The global coffee favorite has rebounded strongly after sales plummeted at the start of the pandemic. Like Airbnb, management has made careful decisions that are paying off as economies reopen. Revenues of $29 billion in 2021 were about $2.5 billion higher than the $26.5 billion they earned in 2019. Meanwhile, operating profit of $4.6 billion dollars in 2021 was the highest in the last decade.
Starbucks (NASDAQ:SBUX) closed several hundred of its downtown locations at the start of the pandemic, a move that turns out to be brilliant in hindsight.
Additionally, Starbucks has accelerated its efforts to expand its international presence. National locations were already more expensive to operate, and the situation is only getting worse as labor shortages drive up wages. A higher share of international stores is likely to increase the company’s overall profitability in the longer term.
Starbucks is also trading at a P/E ratio near its five-year low.
A common theme
As you may have noticed, the common theme for these stocks is that they are selling at valuations close to their recent lows. Additionally, the companies are on sound footing, increasing their profits, and generally have management that has demonstrated competence in running the business. These are some of the reasons I bought them in the first place, and I’m ready to add more in the event of a stock market crash.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Parkev Tatevosian owns Airbnb, Inc., Alphabet (C-shares), Amazon, Chegg and Starbucks. The Motley Fool owns and recommends Airbnb, Inc., Alphabet (A shares), Amazon and Starbucks. The Motley Fool recommends Alphabet (C-shares) and Chegg and recommends the following options: April 2022 $100 Short Calls on Starbucks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.