There’s no sugarcoating it: January was a rough month for Wall Street and investors. Both the benchmark S&P 500 and growth stock-dependent Nasdaq Composite endured their largest corrections since the pandemic-induced crash of March 2020.
Although stocks have bounced back considerably in recent days, there remain no shortage of catalysts that could send the stock market into a tailspin. The thing to understand is that while stock market crashes and corrections are common, they’re also, historically, the perfect time to put your money to work in high-quality companies.
If this recent correction were to accelerate into a full-fledged stock market crash, the following four stocks would be genius buys.
For more than a decade, e-commerce giant Amazon (NASDAQ:AMZN) has been a smart place for investors to put their money to work during any crash or sizable correction.
Most people are familiar with Amazon because of its top-notch online marketplace. Last August, eMarketer estimated that Amazon would account for more than 41% of all online spending in the U.S. for 2021. That’s more than 34 percentage points above the next-closest competitor, Walmart.
But what makes this online marketplace tick is the company’s push to grow its Prime member count. The annual fees paid by Prime’s approximately 200 million members helps to buoy Amazon’s razor-thin retail margins, and more importantly allows the company to undercut traditional brick-and-mortar retailers on price. It also doesn’t hurt that Prime members are more inclined to get their money’s worth by purchasing 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 almost a third of global cloud infrastructure spending in the third quarter. Cloud spending is still, arguably, in the early innings, which means this high-margin segment can more than double Amazon’s operating cash flow by mid-decade.
Planet 13 Holdings
One thing that became crystal clear during the pandemic is that cannabis is treated as a non-discretionary good by consumers. In other words, people are going to buy medical and recreational pot no matter how well or poorly the economy is performing. That’s what makes unique marijuana stock Planet 13 Holdings (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 has just two operating dispensaries. But these aren’t your run-of-the-mill pot stores. The Las Vegas SuperStore spans 112,000 square feet and features a café, events center, and consumer-facing processing center, in addition to a vast amount of selling space. Meanwhile, the Orange County Superstore in Santa Ana, Calif., is 55,000 square feet in size, with 16,500 square feet devoted to selling. These stores are just as much an experience as they are an opportunity to make a sale.
Planet 13 has done a particularly good job of growing sales at its flagship Las Vegas SuperStore. This particular location has incorporated technology via self-pay kiosks, and (pardon the pun) is high on personalization. Buyers can be guided through the store with their own personal budtender.
With a tourist-centric approach, Planet 13 is set to expand to Chicago, Ill., Miami, Fl., and Orlando, Fl., as its next destinations. Considering that the company is on the verge of recurring profitability, it would make for a smart buy if a market crash occurred.
Value stocks can make for genius buys during a market crash or correction, too. Few companies would offer a more attractive valuation floor than auto giant General Motors (NYSE:GM).
Historically, auto stocks sport low price-to-earnings ratios, which is a reflection of their cyclical ties and generally high debt levels. But automakers like GM are the verge of benefiting from a multi-decade growth spurt brought on by the electrification of consumer and enterprise vehicles.
Last year, General Motors announced that it was upping its spending on electric vehicles (EV), autonomous vehicles, and batteries to an aggregate of $35 billion through 2025. The expectation, per CEO Mary Barra, is for GM to have two fully devoted EV battery plants up and running by 2023, and for the company to have launched 30 new EVs globally by mid-decade.
As I’ve previously pointed out, General Motors’ opportunity is about more than just the United States. In 2021, the company delivered approximately 2.9 million vehicles in China, the world’s leading auto market. With a sizable presence in China and the infrastructure necessary to scale EV production, General Motors has a real shot to gobble up EV market share.
At roughly 8 times Wall Street’s consensus earnings for 2022, GM can drive its shareholders to safety during periods of heightened volatility.
A final stock that would be a genius buy if a stock market crash were to manifest is 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. Though we often think of things like water and electricity as a basic need good or service, cybersecurity has evolved into a necessary solution for businesses with an online or cloud-based presence — especially in the wake of the pandemic. As enterprise data has increasingly moved into the cloud, third-party providers like CrowdStrike, which focuses on end-user protection, have been leaned on to a greater degree.
CrowdStrike’s cloud-native Falcon security platform is effectively the gold-standard in data protection. Falcon is overseeing about 1 trillion events daily, and it’s become more efficient over time at identifying and responding to threats thanks to its use of artificial intelligence.
Arguably the most jaw-dropping aspect of CrowdStrike is that the company has already hit its long-term adjusted subscription gross margin target (77% to 82%+), yet is still in the very early stages of its growth. The key to its success is that existing clients are purchasing 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 writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning 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 richer.
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