There’s no candy: January was a tough month for Wall Street and investors. Both the reference S&P500 and dependent on growth stock Nasdaq Compound suffered their strongest corrections since the pandemic-induced crash of March 2020.
Although stocks have rebounded considerably in recent days, there is no shortage of catalysts that could send the stock market into a tailspin. What you need to understand is that while stock market crashes and corrections are common, they are also, historically, a great time to invest your money in high-quality businesses.
If this recent correction were to accelerate into a full-fledged stock market crash, the next four stocks would be genius buys.
For more than a decade, the e-commerce giant Amazon (NASDAQ:AMZN) has been a smart place for investors to grow their money in the event of a crash or major correction.
Most people know Amazon because of its premier online marketplace. Last August, eMarketer estimated that Amazon would account for more than 41% of all online spending in the United States for 2021. That’s more than 34 percentage points above the closest competitor, walmart.
But what makes this online marketplace work is the company’s drive to grow its Prime membership. Annual fees paid by Prime’s roughly 200 million members help prop up Amazon’s razor-thin retail margins and, more importantly, allow the company to undercut prices from traditional brick-and-mortar retailers. It also doesn’t hurt that Prime members are more likely to get more for their money by buying more on the platform and staying within Amazon’s ecosystem of products and services.
What you might not realize is that Amazon is also the kingpin of cloud infrastructure services. Amazon Web Services (AWS) accounted for nearly a third of global cloud infrastructure spending in the third quarter. Cloud spending is still, arguably, in the early innings, meaning this high-margin segment can more than double Amazon’s operating cash flow by mid-decade.
Planet 13 farms
One thing that has become crystal clear during the pandemic is that cannabis is being treated as a non-discretionary good by consumers. In other words, people will buy medical and recreational pot no matter how the economy performs. This is what makes marijuana stock unique Planet 13 farms (OTC:PLNH.F) such a genius buy if a stock market crash occurs.
Instead of setting up shop in as many legalized states as possible, Planet 13 only has two operating dispensaries. But these are not your ordinary pot shops. The Las Vegas SuperStore spans 112,000 square feet and includes a coffee shop, event center and consumer processing center, in addition to extensive retail space. Meanwhile, the Orange County Superstore in Santa Ana, California is 55,000 square feet, of which 16,500 square feet is dedicated to retail. These stores are as much an experience as a sales opportunity.
Planet 13 has done a particularly good job increasing sales at its flagship Las Vegas supermarket. This particular location has integrated technology through self-paid kiosks and (pardon the pun) is very personalized. Shoppers can be guided through the store with their own personal assistant.
With a tourism-centric approach, Planet 13 is expected to expand to Chicago, Illinois, Miami, Florida and Orlando, Florida as its next destinations. Considering the company is poised to achieve recurring profitability, it would be a smart buy if a stock market crash occurs.
Value stocks can also be genius buys during a stock market crash or correction. Few companies would offer a more attractive valuation floor than the auto giant General Engines (NYSE:GM).
Historically, auto stocks have exhibited low price-earnings ratios, reflecting their cyclical ties and generally high leverage levels. But automakers like GM are poised to benefit from a decades-long growth spurt brought about by the electrification of consumer and business vehicles.
Last year, General Motors announced it was increasing spending on electric vehicles (EVs), autonomous vehicles and batteries to a total of $35 billion through 2025. CEO Mary Barra expects what GM has two fully dedicated EVs. operational battery factories by 2023, and that the company has launched 30 new electric vehicles worldwide by the middle of the decade.
As I’ve pointed out before, General Motors’ opportunity is not limited to the United States. In 2021, the company delivered around 2.9 million vehicles in China, the world’s largest automotive market. With a significant presence in China and the infrastructure to scale EV production, General Motors has a real shot at gobbling up EV market share.
At around 8 times Wall Street consensus earnings for 2022, GM can put its shareholders on the safe side during times of heightened volatility.
A final stock that would be a genius buy should a stock market crash occur is the cybersecurity company CrowdStrike Holdings (NASDAQ:CRWD).
Buying into companies that provide a necessary good or service is a smart way for investors to position themselves during a crash or correction. Although we often think of things like water and electricity as a basic good or service, cybersecurity has become a necessary solution for businesses with an online or cloud presence, especially in the wake of the pandemic. As corporate data increasingly moves to the cloud, third-party vendors like CrowdStrike, which focuses on protecting end users, have come under increased demand.
CrowdStrike’s cloud-native Falcon security platform is truly the gold standard for data protection. Falcon monitors approximately 1 trillion events per day, and it has become more effective over time at identifying and responding to threats through its use of artificial intelligence.
Perhaps the most breathtaking aspect of CrowdStrike is that the company has already achieved its long-term adjusted subscription gross margin target (77%-82%+), but is still in the very early stages of his growth. The key to its success is that existing customers purchase multiple cloud module services. The percentage of subscribers with four or more cloud module subscriptions has skyrocketed from 9% to 68% in less than five years. Since cybersecurity is a high-margin industry, CrowdStrike should have no trouble raking in the cash flow.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.