The incredible recovery seen since the March 2020 market crash makes that meltdown something of a blip. This is why I already have a list of stocks to buy when share prices (inevitably) head south again.
Having looked at the FTSE 100 and FTSE 250 in previous articles, today I’m focusing on three stocks from the small-cap (non-AIM) space.
Ingredients manufacturer Treatt (LSE: TRT) supports the global flavour, fragrance and consumer goods markets. That may not sound particularly racy compared to a glitzy tech share. However, the returns generated over the last year and five years (+63% and +405% respectively) speak for themselves.
On top of this, the gradual reopening of hospitality venues across the world should be a great tailwind for the company which remains a leader in its field.
Of course, there are still potential headwinds ahead. A resurgence in Covid-19 cases and the subsequent re-introduction of certain restrictions could put the brakes on this momentum. As solid a business as this is, a P/E of 36 for the current financial year (ending 30 September) doesn’t give me much of a margin of safety either.
Personally, I’d much prefer to snap up this stock when investors are throwing the baby out with the bathwater.
Harry Potter publisher Bloomsbury (LSE: BMY) is another small-cap star I’d buy in a general market crash.
A huge beneficiary of multiple UK lockdowns, revenue and profit soared in 2020 as many people opted to lose themselves in a novel or seven to pass the time. And, consequently, his has boosted the share price considerably ( up 75% over the last 12 months alone).
Quite whether this momentum can be sustained is another thing. While indulging in a book will hardly break the bank, I wonder if a lot of casual readers will now focus on more active pursuits. Should this be the case, it’s surely inevitable that earnings will moderate.
It’s also worth remembering that publishing — like the movie, music and gaming industries — can be unpredictable. There’s no guarantee a particular title will sell as many copies as hoped.
Sure, BMY’s current valuation is hardly excessive, at 19 times forecast earnings. There’s a nice dividend stream too. Even so, I’d be inclined to really pile into this stock when the company’s purple patch has ended.
Car seller Motorpoint (LSE: MOTR) is a third small-cap stock I’d potentially buy if/when we experience another market crash.
Thanks to the shortage of semiconductors for new vehicles, MOTR has seen strong demand for second-hand cars as the UK emerges from lockdown. Accordingly, the company reported “record sales” in the first two months of its new financial year back in July.
Importantly, these sales were also “significantly ahead” of numbers logged in the year before Covid-19 began wreaking havoc. Add in a commitment to becoming an e-commerce-led business and I think the future looks bright for the £330m-cap.
Then again, MOTR arguably involves the most risk of the three companies mentioned here. After all, few people think about buying a car when troubled times arrive. This is also a low-margin business in a competitive industry, making the forward P/E of 23 appear a bit expensive.
Having climbed almost 33% in value in the last 12 months, I’m not sure that now’s the best time for me to buy.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Bloomsbury Publishing, Motorpoint, and Treatt. 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.