Having recently lost around 300 points between 20 September and 4 October, we’ve recently seen the Footsie slump following somewhat of a year-long resurgence. While it’s important to note that this is more of a stock market correction than a crash, a Foolish investor views slides like this as a potential buying opportunity!
City of London Investment Trust
What it does: City of London is an investment trust that seeks long-term growth in income and capital, mostly from listed UK stocks.
By Alan Oscroft. The City of London Investment Trust (LSE: CTY) holds shares in a range of big UK companies. Its top 10 currently include Shell, Unilever, HSBC Holdings, BAE Systems, and British American Tobacco.
A quarter of the trust’s cash is in the financial services sector. And that so often looks super cheap in a market downturn.
In a crash, an investment that puts 25% of my money into financials, while offering wide diversification across a range of other sectors, looks perfect for my strategy.
The investment trust does lack real estate. Real estate has its ups and downs, but I see it as a long-term cash cow. Still, I can’t have everything.
City of London has raised its dividend every year for 57 years, currently at 5.4%. That’s the risk too, though. If a crash forces it to halt that progress, it could take a hit.
But, the dividend held up in the 2020 crash, so I’m optimistic.
Alan Oscroft owns shares in City of London Investment Trust.
What it does: Diageo manufactures and markets a range of premium beverages globally including Smirnoff and Johnnie Walker
By Christopher Ruane. The commercial attractions of drinks giant Diageo (LSE: DGE) seem obvious to me. Its premium branding give it juicy profit margins, the market is huge and as a global player it has economies of scale.
Last year, the company reported post-tax profits of £3.7bn on revenues of £23.5bn. it raised its dividend, as it has done annually for over three decades. Diageo is a well-run financial juggernaut. It has competitive advantages ranging from its brands to iconic whisky distilleries.
That rosy picture does face risks. A decline in the proportion of young people drinking alcohol could hurt sales and profits. Diageo is trying to combat that by building its alcohol-free offering.
Quality does not come cheap. The shares currently trade on a price-to-earnings ratio of 20. That is a bit high for my tastes – but if a stock market crash let me scoop up the shares for less, I would do so.
Christopher Ruane does not own shares in Diageo.
What it does: Games Workshop designs, manufactures and distributes miniature figures and games through its own stores and independent retailers.
By Paul Summers. For me, a market crash is an opportunity to buy high-quality stocks that previously traded on high(ish) valuations. It’s not about scavenging through the bombed-out trash. Accordingly, my ‘first stock’ would be Games Workshop (LSE: GAW).
I already own a stake in the company, bought during the pandemic plunge. Despite having no personal interest in its products, I knew that its Warhammer brand commanded a huge and loyal following even during tough economic times. Tellingly, record profits have been posted in 2023.
With movie and TV tie-ins on the horizon, I think the outlook is as good as ever. Add a beautifully robust balance sheet, indisputable leadership of a niche market and staggeringly high margins and I struggle to think of a better business to snap up when everyone else is selling.
Paul Summers owns shares in Games Workshop.
What it does: NVIDIA is a leading pioneer of graphics processing units (GPUs) that is powering the AI revolution.
By Andrew Mackie. Mega-cap tech stocks have had a phenomenal 2023. But for me Nvidia (NASDAQ: NVDA) is head and shoulders above any other growth stock out there. If the market did tank, then I wouldn’t hesitate to buy in.
There is no doubt in my mind that AI is going to fulfil on its promises and will be as revolutionary as the Internet itself. NVIDIA is the company that will be at the heart of this revolution. As the pioneer of visual computing, its GPUs are expected to power everything from self-driving cars, intelligent machines and robots.
AI is fundamentally changing not only what software can make but also how one makes software. Learned perception, for example, through speech and image recognition only represents the first wave of AI. The use cases are simply limitless and include transportation, medical imaging, drug discoveries, product recommendations and fraud detection.
The only reason I haven’t bought in yet relate to its valuation. Currently trading at over 40 times annual revenues would be a reasonable price to pay if the economy was booming. But with inflation far from tamed and interest rates continuing to rise, a hard landing scenario looks increasingly likely to me. Therefore, I am waiting for a more attractive entry point.
Andrew Mackie does not own shares in Nvidia.
What it does: Unilever is a UK-based consumer goods company boasting over 400 brand names in over 190 countries around the world.
By Matthew Dumigan. Stock market crashes are often the result of several macroeconomic factors and they usually occur amid the wider fallout of an economic crisis or major catastrophic event.
As such, the first UK stock I’d buy if the market crashed tomorrow would be Unilever (LSE:ULVR).
Admittedly, revenue growth and margins have fallen in recent years, particularly in Europe where certain brands appear out of favour.
But as a well-established company operating in a traditionally defensive sector, Unilever provides an array of essential goods that people still need even in challenging economic conditions.
Moreover, as a truly global business operating in so many places, the group avoids the problem of having a reliance on just a handful of markets. This is important to me because if one of these market experiences a downturn, revenue from other markets should help mitigate the impact on the overall business.
Matthew Dumigan does not own shares in Unilever.