Investor Alert: Prepare for the Market Crash With These 3 Stocks
As an investor with significant positions in equities, I am an optimist. However, it’s important to be realistic at the same time. This helps in readjusting the portfolio depending on macroeconomic, geopolitical, and other headwinds. In my view, potential delay in rate cuts is likely to make the market nervous as it might imply a hard landing for the economy. I would therefore look at stocks to buy for a market crash.
I must however add that I see the first-rate cut coming before the Presidential elections. Therefore, there are two strategies that I would consider for the coming quarters. First, buy low-beta blue-chip stocks that would protect the portfolio from capital erosion if there is a 10% to 15% correction in the index.
Further, look at buying quality growth stocks if the broad markets indeed decline in the coming months. I expect a strong recovery in the markets towards the end of the year. For now, let’s discuss three stocks to buy for a market crash.
Newmont Corporation (NEM)
Gold has declined from highs with tensions deescalating in the Middle East. I however remain bullish on the precious metal with expansionary policies due later this year. Newmont Corporation (NYSE:NEM) is a blue-chip gold miner that’s worth considering at current levels of $37.5.
It’s worth noting that NEM stock trades at a forward price-earnings ratio of 17.7. With an investment grade balance sheet and quality assets, the gold miner is trading at a valuation gap. Further, the low-beta stock offers an attractive dividend yield of 2.56%.
As an overview, Newmont has 128 million ounces of gold reserves. Further, the company has 155 million ounces of gold resources. With quality tier one assets, the company has clear production visibility beyond the current decade.
From a financial perspective, Newmont reported adjusted EBITDA of $4.2 billion last year. With higher realized gold price, it’s likely that EBITDA and cash flows will swell. This will provide flexibility for dividends and aggressive exploration investments.
Merck (MRK)
Merck (NYSE:MRK) is another quality blue-chip stock with a low-beta and trades at an attractive valuation. At a forward price-earnings ratio of 14.8, the downside for MRK stock seems capped. Further, the upside potential is significant considering the company’s growth outlook.
The first point to note is that Merck has a deep pipeline. Currently, 10 programs are under review, 30 in phase three, and 80 in phase two. As new molecular entities are commercialized in the next few years, it will ensure steady growth.
Last year, Merck reported 1% growth in revenue on a year-on-year basis to $60.1 billion. For the current year, growth is likely to accelerate in the range of 4% to 7%. This will be associated with upside in earnings and cash flows. Further, the company expects healthy growth to sustain on the back of the oncology, cardiometabolic, and immunology pipeline.
In general, pharmaceutical stocks have been depressed after the pandemic. It’s a good opportunity to consider exposure to quality names like Merck.
Lockheed Martin (LMT)
Global defense spending for 2023 surged by 6.8% on a year-on-year basis to $2.44 trillion. With rising geopolitical tensions, it’s likely that spending will continue to increase at a healthy rate. Lockheed Martin (NYSE:LMT) stock is an attractive option among defense stocks.
LMT stock trades at an attractive forward price-earnings ratio of 17.7 and offers a dividend yield of 2.72%. Further, the low-beta stock has been sideways for the last 12 months. With positive industry tailwinds, I expect a breakout on the upside.
It’s also worth mentioning that be it inflation or recession, global defense spending is immune to these factors. Lockheed Martin is therefore well positioned to grow with a healthy order backlog of $160.6 billion. For the current year, the company has also guided for free cash flow of $6.2 billion. This provides flexibility for dividends and investments in next-generation defense technologies. If there is a market crash, make sure you have this stock in your portfolio.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
