Here are 2 of my top shares to buy if we get a stock market crash this summer

Jon Smith reveals two stocks on his watchlist of shares to buy if we see the market move lower in coming months due to investor panic.

| More on:
Black woman using loudspeaker to be heard

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market has ripped higher this month to fresh all-time highs. Even though this could keep going, some investors do start to fret that a crash is still coming. Some cite escalating geopolitical tensions around the world, along with concerns that interest rates might not be cut this summer as most are planning for. Even though this isn’t my core view, I’ve got two stocks on my watchlist that I think would be great shares to buy during a crash.

Too lofty right now

The first one might not be a big surprise for many. Rolls-Royce (LSE:RR) shares have jumped by 183% over the past year. With the share price currently above 400p, I simply can’t justify buying at the moment. The valuation looks stretched and I struggle to see a massive move higher in the coming year.

Yet when I consider what has driven the move, it does make sense. The business has done a complete 180-degree turn from the struggling pandemic company of 2021. It is making good ground in the power generation division. Further, the civil aerospace profit margins are really starting to recover. This was one of the areas that was hit the hardest during the pandemic. Yet for 2023, the operating profit margin was 11.6%, up from 2.5% from the year before.

Of course, a risk is that the bulk of the turnaround has now happened. This could mean that financial performance going forward stalls, instead of increasing further.

Based on the fundamentals, I like the stock. Therefore, if we did see the share price swiftly drop by a significant amount, this is one of the companies I’d certainly look to snap up.

A steady income option

The other stock on my watchlist is the Supermarket Income REIT (LSE:SUPR). The real estate investment trust does what it says on the tin. Namely, it invests in a diversified portfolio of supermarket real estate assets in the UK. The income reaped from leasing these assets out means that it can pay shareholders dividends along the way.

The share price is down 14% over the past year. REITs have struggled due to high interest rates making it expensive to finance new purchases. Further, demand from new tenants is lower as a result of the cost-of-living crisis.

Even though these are risks going forward, I think the REIT could slot into my income portfolio quite nicely. After all, the current dividend yield is 8.03%.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

For investors that don’t have any income stocks, I think this is a great option to consider buying now. Given that I already have enough income stocks in my portfolio, I’d only look to add this if it became a real bargain, such as during a market crash. The lower share price would act to push up the dividend yield, making it even higher. At that point, I’d look to step in and purchase.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. 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.

More on Dividend Shares

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Investing Articles

Is Tesco’s share price still a bargain after rising 26% over a year?

Recent results show Tesco is still growing its leading market share, and despite its share price gains this year, it…

Read more »

Investing Articles

Here’s what the National Grid share price fall could mean for passive income investors

It's long been seen as one of the FTSE 100's best stocks for durable dividends. What does the recent National…

Read more »

Female florist with Down's syndrome working in small business
Investing Articles

£6,000 in savings? Here’s how I’d try to turn that into a £500 monthly passive income

With careful planning and patience, it’s not hard to earn a passive income with UK shares. Here’s one way to…

Read more »