The Motley Fool

3 small-cap stocks I’d buy in the next market crash

Road trip. Father and son travelling together by car
Image source: Getty Images

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.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Treatt

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. 

Bloomsbury

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.

Motorpoint 

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. 

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.