The FTSE 100 and other markets dipped last week as a new variant of the coronavirus emerged. When the pandemic began, there was a market crash that threw up opportunities to buy cheap shares. Some of these shares are flying high currently.
If there were another market crash, I have identified three stocks I would add to my portfolio. These are all from different sectors, as I believe in a diversified portfolio. I understand some of these stocks could experience short-term pain but I invest for the long term.
Market crash winner
Clipper Logistics (LSE:CLG) has performed excellently since the pandemic began. It was already on an upward trajectory but the pandemic sped this up.
Clipper is a warehousing and e-fulfilment provider. The recent e-commerce boom, which was also exacerbated by the pandemic due to store closures, has benefitted many firms in Clipper’s sector. It specialises in the retail sector and counts powerhouses such as ASOS, M&S, and H&M among its customer base.
When the market crash of 2020 occurred, Clipper’s share price dipped as low as 149p. As I write, shares are trading for 649p, which is a mammoth 335% return! In the past 12 months, the Clipper share price is up 32% as well. It is worth noting that the shares have declined in the past three months, but I believe this is due to macroeconomic pressures.
I like Clipper for a few reasons. Firstly, it has a good track record of performance. I understand past performance is not a guarantee of the future but I use it as a gauge nevertheless. I can see that revenue and gross profit have been increasing year on year for four years now. In addition to this, Clipper continues to acquire smaller businesses to enhance its offering. Finally, it continues to win new business including a major deal to partner up with Farfetch to handle its e-fulfilment. Farfetch is a luxury goods website listed in the US. Clipper also pays a consistent dividend that would make me a passive income.
Clipper does come with risks. Rising inflation and rising costs could eat away at margins. The well-documented shortage of HGV drivers could affect its ability to operate normally. Finally, Clipper does look expensive with a price-to-earnings ratio of around 30.
Overall I believe, if there is a market crash, Clipper would dip but be a good cheap share to add to my portfolio. I would expect to see its share price bounce back as well continue its impressive growth trajectory despite some short-term issues.
IT firm Softcat (LSE:SCT) is another stock I would keep an eye on if the market were to head towards a crash. Softcat supplies IT infrastructure to public and private sector firms. It does this through four areas which are cyber security, IT intelligence, hybrid infrastructure, and digital workspace tools.
The pandemic led many organisations to reconsider their IT estate and ways of working. This was due to the need for many firms to offer home working to ensure operations continued. Softcat was one of a number of tech stocks to benefit from this.
As I write, shares in Softcat are trading for 1,856p. A year ago, shares were trading for 1,134p, which is a handsome 63% return. Softcat’s share price has comfortably surpassed pre-crash 2020 levels.
My bullish stance towards Softcat stems from its impressive growth trajectory to date as well as the role technology plays in how companies work. Softcat has grown and expanded, rapidly increasing its presence and footprint in new territories over the years. In addition to this, it has a good track record of performance. Like Clipper, revenue and growth have increased year on year for the past four years. Q1 results last week were brief but encouraging. Full-year results are due next month and I believe they will be positive.
I must note the risks attached with Softcat despite viewing it as a potential market crash opportunity. Competition is a huge risk in its sector. There are many other similar firms vying for market share and often the same customer base. In addition to this, rising inflation and costs could also affect it if it is unable to pass costs to customers, affecting margins and performance.
I would happily add Softcat shares to my portfolio if there were another crash. I am confident that it would bounce back from any drop in share price and performance. It has a good track record and an impressive growth story to date too. I would be prepared for some short-term crash-related pain, however.
When the market crashed in 2020, many investors turned to commodities as a safe haven. With that in mind, my final pick is Polymetal International (LSE:POLY). Polymetal is a major gold and silver producer. Its core assets are in Russia and Kazakhstan with the support of over 12,000 employees. With precious metal prices on the rise due to inflation fears in all major world economies, Polymetal could be crash-proof in my opinion.
As I write, shares in Polymetal are trading for 1,355p. At this time last year, shares were trading for 1,562p, which means shares are down 13% over a 12-month period. Volatility in world markets and the pandemic has caused share price fluctuations for firms like Polymetal so I am not worried too much.
Like my other picks, Polymetal has some good fundamentals that make me consider it a market crash opportunity. It too has a good track record of performance. I can see that revenue and gross profit have increased year on year for four years. One of Polymetal’s attractions is its dividend record. It pays a handsome dividend consistently. Since its initial public offering back in 2011, it has paid close to $2bn in dividends to its shareholders!
The risks with Polymetal are apparent. Commodities are volatile, as I mentioned earlier. This volatility is more prevalent in times of economic uncertainty. This can affect performance, share price, and investor sentiment too. Plus, any dividend payments may be cancelled if there were a crash. Competition is also another risk I must consider.
Overall, if there were another market crash I would add Polymetal shares to my portfolio. Like my other picks, it has a good track record, pays a dividend to make a passive income, and commodities can be a safe haven in times of economic uncertainty. With the crash I would expect shortterm pain, but I invest for the longer term so would be prepared to be patient.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Clipper Logistics and Softcat. 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.