The FTSE 100 has dropped around 700 points in recent weeks, but I’d call that a dip rather than a full-blown stock market crash.
We may still get a crash as what BlackRock’s Larry Fink calls a “slow-rolling” crisis spreads through the banking sector. If we do, I’ll aim to take advantage by snapping up these three top stocks at reduced prices and holding them for the long term.
Falling shares are cheaper
The FTSE 100 includes some magnificent dividend stocks right now, and their yields will only rise if share prices fall further. As a fund manager, Schroders (LSE: SDR) could be on the frontline of the next big sell-off. If so, it could suddenly look much better value.
Schroders has had a rough year, its share price down 20% as volatile markets hit assets under management and performance-related fees. Operating profits fell 14% year on year, but were still robust at £723m.
An all-out crash would no doubt inflict further damage, and that’s when I’d swoop. That will reduce the valuation of 14.9 times earnings and boost the dividend yield. Today, Schroders would pay me income of 4.81% a year. A crash might push that well above 5%.
If the FTSE 100 does crash at some point, I’d also like to buy equipment rental firm Ashtead Group (LSE: AHT). I’ve been itching to buy this fast-growing company for years, but it’s always been that bit too expensive.
This US-focused company just keeps on growing, posting a 26% rise in pre-tax profits to $535m in the most recent quarter, with revenue up 21% to £2.4bn. The board now expects full-year results to beat expectations, keeping the stock in demand and share price high.
Buy low, then hold and hold
Today, Ashtead trades at 19.5 times earnings and yields 2%, roughly half the FTSE 100 average. A stock market meltdown could swing both these figures in my favour without hitting the underlying case for buying it.
Every business faces challenges, in this case it’s “supply chain constraints, inflation and labour scarcity”, in CEO Brendan Horgan’s own words. I still think it looks like a great long-term buy-and-hold. I’d just like a lower entry point.
I’d apply a similar approach to consumer credit reporting company Experian (LSE: EXPN). It’s widely admired for its super-deep defensive moat, because new entrants would struggle to match its limitless pool of data. The company has global reach too, constantly moving into new markets, but it’s expensive.
Experian is currently trading at around 25.8 times earnings, while the yield is low at 1.6%. With luck, a crash might make both these figures look more attractive, although as ever with equities, there’s no guarantee. While many of my favourite FTSE 100 stocks have suffered double-digit drops over the last week, Experian is down a modest 5%.
The risk is that it could fall foul of consumer privacy concerns, despite its recently victory against the Information Commissioner’s Office over the way it deals with personal information. I’d like to own Experian, but not at today’s price and yield. Let’s see if this year’s stock market volatility hands me a buying opportunity.
