UK equity markets have been enjoying a bull run for over 10 years now and many people worry this can’t last.
Hopefully, a market crash is not imminent, but it’s good to be prepared if it does rear its ugly head.
Buy low, soar high
Long-term investors should remember, a market crash provides a great opportunity to buy quality shares at cheap prices.
Buying a stock when the market has crashed can be daunting because you’ll be wondering if it has further to fall. Timing the market is not an exact science and I think getting it right is more down to luck than any kind of skill.
If you’re buying shares in solid companies that will rise in value over the long term, then the nitty-gritty of the price you pay for the stock shouldn’t really matter. Having confidence in the company you’re buying into is key.
Price-to-earnings ratios (P/E) for many of the FTSE 100’s most favoured companies have reached overly expensive levels in this recent bull run. So, some long-term investors would welcome the opportunity to buy their favourite shares at a lower price.
Therefore, a market correction is a double-edged sword. It’s not pleasant to see billions of pounds knocked off the value of the stock market, but it does bring opportunity.
Buy-and-hold investors with the ability to ride out the bad times will be rewarded for their patience when the bull run returns.
Live long and prosper
Feeling fitter and younger is a high priority for an ageing population looking to enjoy a worry-free retirement. This has driven the number of people undergoing joint replacements to record highs.
Smith & Nephew is a medical tech company specialising in orthopaedics (including knee and hip replacements), along with sports medicine and wound management.
The Smith & Nephew share price has enjoyed a 27% rise over the past year. This despite a period of uncertainty in the autumn when the chief executive unexpectedly resigned over a pay dispute.
The company has a £25bn market cap, P/E of 23, earnings per share of 79p, and a dividend yield of approximately 1.5%.
Its niche popularity and increasing demand mean it’s rarely a cheap stock to buy into. That’s why it’s one I’d leap at in a market crash. I don’t see demand declining soon, so I think it’s a relatively safe investment for the long term.
Divide and conquer
World-famous drinks brand Coca Cola doesn’t appear to be slowing down in either popularity or growth. Coca Cola HBC is one of the world’s largest bottlers for The Coca‑Cola Company.
With a £10bn market cap, its stock value has risen over 158% in the past five years. It has a P/E of 19, earnings per share of £1.43, and a dividend yield around 2%.
Coca Cola has been upping its game by moving its focus to low sugar, energy, tea, and coffee categories. In doing so, it has diversified its portfolio of soft drinks to ensure it continues to grow its market share in areas that customers desire.
During a market crash, when prices are suppressed, can be the perfect time to pick up bargains. Keep a list of target companies you like, so that you’re ready to act.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.