Don’t fear the stock market crash. The chance that you, me, and other share pickers can make a million remains as strong as it ever has. Economic crashes are nothing new, of course. Their effects on shareholder rewards, over a longer time horizon, tend to be absorbed.
That said, it still makes sense for investors to be prepared for a worse-than-usual downturn. The financial impact of the Wall Street Crash lasted from 1929 through to the outbreak of World War II. And many economists reckon the fallout of the Covid-19 outbreak could make the Great Depression look like small potatoes.
This means that investors hoping to make a million may need to pick shares whose earnings have proven they can stand up during times of economic stress. We’re talking utilities companies, defence contractors, food producers, pharmaceuticals manufacturers, and mobile telecoms operators.
Against the cycle
Investors don’t just need to go shopping for defensive shares, though. There are a multitude of counter-cyclical shares whose bottom lines actually stand to benefit from the economic malaise, and who could well make their shareholders a million or more.
Insolvency specialist Begbies Traynor is one. So is discount retailer B&M European Value Retail, which should benefit from shrinking consumer spending power; alcoholic drinks manufacturer Diageo, sales of whose products have risen during previous recessions; and G4S, demand for whose policing services would rise should the crime rate pick up.
There is an abundance of safe-haven and counter-cyclical stocks for UK investors to pick from, then. But remember that successful stock pickers tend to lock their money up for a period of 10 years at least. And so considering cyclical shares, along with those better placed to ride out what could be a troubled 2020s for the global economy, remains a sound idea.
So concerns over the social, economic, and political impact of Covid-19 are dominating investor decisions right now. It’s important to remember, though, that share pickers can also latch onto certain themes that the coronavirus crisis will create over the longer term and try to make a million that way.
Soap and handgel sales, along with demand for disinfectant products have ballooned since the outbreak. They should continue to grow, too, as a rising global population takes steps to try to prevent another public health crisis. This bodes well for soap maker Unilever, then, alongside household cleaning product maker Reckitt Benckiser, to name but a couple of specialists in this area.
The need for greater hygiene is perhaps the most obvious in a post-coronavirus world, sure. But profits at Tritax Big Box are also set to rocket as the rising of e-commerce boosts demand for its warehousing and distribution hubs. Cloud computing providers like Softcat, meanwhile, will benefit from a likely explosion in the number of people working from home. And recycling giant Renewi will become more important as lawmakers accelerate steps to clean up the air that we breathe.
The Covid-19 outbreak means that investors need to be a bit more careful when using their cash. But it doesn’t mean that their chances to make a million have been shot to pieces. With the right strategy it’s still possible to get rich from stock markets.
Views expressed 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.