Market crash or no market crash! Keep calm and carry on investing

With financial markets reeling from Monday’s market crash and multiple factors weighing on global stocks, are further crashes imminent?

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Monday’s stock market crash has given way to widespread panic about the coronavirus and uncertainty surrounding the damage it may cause. Besides this, there’s an escalating oil price war, minuscule interest rates, and unprecedented levels of global debt.  

How should markets react? Time will tell, but I don’t think it will be pretty.

Is another stock market crash coming?

If you’ve done your research and have the cash to invest, you may not get a better opportunity to purchase shares in quality companies at bargain prices.

Historically, the worst market crashes have not occurred on single days, but on multiple days in relatively quick succession, according to data from Refinitiv.

The big stock market crash known as Black Monday occurred on 19 October 1987. On that day, the FTSE 100 fell 10.8%, but it also fell a further 12.2%, 5.7%, and 6.2% on single days during the following week. These were all historically large falls for the FTSE 100, and all four occurred within an eight-day period.

A similar pattern appeared in autumn 2008 when the FTSE 100 experienced four notable one-day falls of between 5.7% and 8.8% in a one-month period.

Although this may be alarming at first glance, for those investors looking to snap up shares in companies at rock-bottom prices, there could be opportunities ahead.

This week we saw a repeat of 1987’s Black Monday when markets around the world crashed in response to a 30% drop in the price of oil and increasing worry about the virus. I don’t think this was a one-off event.

To be prepared is to be forearmed

Many British shares have been suppressed in recent years in response to Brexit and worry surrounding a global slowdown caused by the US-China trade war. With these new concerns thrown into the mix, some UK shares are becoming insanely cheap. 

Of course, a few will fall too far to recover, which is why due diligence is so important. I’d avoid oil, airline, or cruise stocks for now, and I think restaurant or entertainment stocks will be out of favour for some time too.

Niche growth areas

One stock I like the look of is Porvair (LSE:PRV), a specialist filtration and environmental technology company. Its filtration equipment is used in aerospace, bioscience, energy, water, and industrial applications.

The company released positive preliminary results last month, and the CEO stated it’s well positioned to benefit from global trends. These include tighter environmental regulations, growth in analytical science, the expansion of air travel, the replacement of plastic by aluminium, and the drive for manufacturing process efficiency.

The expansion of air travel may no longer be so promising, but I think growth in the other areas may increase. Of course, supply chain issues could have an impact in the near term.

Over the last five years, the Porvair share price has risen 119%. Its price-to-earnings ratio is 27, which is too high to call a bargain share. However, you could get value for money if you’re buying in a market crash. Porvair stock also has a small dividend yield of 0.77%.

I particularly like that Porvair has a low debt ratio and is specialising in niche areas of growth. I think it is one company that can recover well from this current market turmoil and shine in the better days ahead.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of Porvair. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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