I believe the best stocks to protect your portfolio from market declines are those companies with strong balance sheets, durable business models and a long-term focus.
Today, I’m going to outline three companies that I believe meet all of these criteria and could be fantastic buys for your portfolio ahead of the next market crash.
Safety in bricks and mortar
My first pick is British Land (LSE: BLND). Recently, the market has been selling this company as it seems investors are concerned about its exposure to the struggling retail sector. However, despite these concerns, British Land’s management is adamant that firm has what it takes to be able to weather the retail storm — and I agree with them.
Even though the group does have significant exposure to shopping centres and other retail commercial property, management has been divesting weaker properties and reinvesting the proceeds in more sustainable properties, such as the build-to-rent and office markets.
Shareholders buying today can snap up British Land’s £9.3bn property portfolio at a discount of 36% to its net asset value of 939p. At the time of writing, the stock supports a dividend yield of 5.3%.
In my opinion, this valuation, coupled with the market-beating dividend yield, will protect investors from any downside in the next market crash.
As well as British Land, I reckon shares in cruise group Carnival (LSE: CCL) are worth buying ahead of the next market crash.
The cruise industry is booming, and forecasts suggest the market will only get bigger as the world’s population ages. On top of this, the growth of the middle class in Asia is driving up demand across the world for cruise holidays.
Carnival is investing hundreds of millions of dollars in new cruise ships to capitalise on this market growth. As demand for the company’s services continues to grow, City analysts have pencilled in earnings per share growth of 14% over the next two years. Based on these forecasts, shares in the group are trading at a 2020 P/E of 11.3. They also support a highly attractive dividend yield of 3.9%.
No matter what happens in the stock market over the next 12 to 24 months, I think it’s going to have minimal impact on the underlying demand for cruise holidays.
My final stock to buy ahead of the next market crash isn’t strictly an independent company, it’s an investment trust, Scottish Mortgage Investment Trust (LSE: SMT) to be exact.
The main reason why I’m recommending this trust is that its most significant holdings are some of the most transformational businesses active in the world today. For example, Amazon.com makes up 9.8% of the trust’s assets under management.
In my opinion, when the next downturn comes, tech companies that have come to dominate their respective industries over the past decade will be the ones that come out on top as they use market weakness to increase their hold on the markets they already dominate. Scottish Mortage is, in my opinion, the best way to play this trend as it gives you an instantly diversified portfolio of some of the biggest tech companies in the world.
The trust is currently trading at a slight 2.5% premium to net asset value, and it charges an annual management fee of 0.37%. The dividend yield is now 0.63%.
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Rupert Hargreaves owns shares in British Land. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended British Land Co and Carnival. 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.