Buying shares when the stock market crashed during the Covid-19 pandemic proved to be a great idea. But investors should note things are different this time.
I think right now could – once again – be an unusually good opportunity for investors. But that’s not a reason to go buying stocks without due care and attention.
What’s different?
I think there are two big differences between now and the Covid-19 crash. One is probably bad news for investors and the other is much more positive.
When share prices fell during the pandemic, the US Federal Reserve was quick to respond with a supportive monetary policy. This helped stabilise markets relatively quickly.
That doesn’t seem to be the case this time around. As a result, I think investors hoping for the kind of rapid recovery they saw since 2020 are likely to be disappointed.
The other difference is much more positive. Unlike Covid-19, the policies that have shaken the stock market might conceivably benefit the US in the long term.
This isn’t by no means guaranteed. But the aim is to increase US jobs, boost its manufacturing capacity, and make its products more competitive – all of which could be long-term positives.
In other words, the latest stock market crash looks different to the pandemic. I think things look worse in the short term, but potentially better from a long-term perspective.
Recession-resistance?
There are no guarantees, but a longer period of low share prices before a more durable recovery is probably good for investors. The big question is which stocks to consider buying.
One name that stands out to me is Rentokil Initial (LSE:RTO). The FTSE 100 company generates 58% of its sales in the US, but it has an important benefit over other companies.
Unlike other industries, demand for pest control tends to be resilient in a recession. Rodents and insects tend to behave the same way in most economic environments.
Rentokil shareholders therefore probably have less to worry about in a recession than other investors. But that’s not to say they don’t have other issues to think about.
The firm still has a lot of debt on its balance sheet following a big acquisition in 2022. That makes the possibility of inflation causing higher interest rates a genuine risk.
Nonetheless, the share price falling 11% in the last week looks like an opportunity to me. There are quite a few stocks I’m considering at the moment, and Rentokil is one of them.
Buying opportunities
Not every stock market crash is the same. And investors can’t afford to ignore the differences between the current situation and the Covid-19 pandemic.
Despite this, I think lower share prices can mean big opportunities. But it’s important to be selective and think carefully about which stocks to consider buying.
I see Rentokil as a durable business that has good long-term prospects. So a sharp fall in the company’s share price puts it firmly on my radar.
I don’t expect inflation or even a recession to have a meaningful impact on the business. As a result, I think it’s one that investors should consider buying.
