A second stock market crash could be just around the corner. As such, now could be the time for investors to snap up FTSE 100 stocks that benefitted from the crash earlier this year.
Buying stocks that profited in the last crash, such as the two companies below, may be a way to achieve a positive return in the next slump.
Stock market crash bargain
Asset manager M&G (LSE: MNG) saw its share price crumble in the last stock market crash. However, despite this performance, the group’s underlying performance seems to have held up well.
Even though assets under management and administration declined from £352bn to £323bn in the first quarter, the group was able to use the market crash to snap up a wealth management business. This should help M&G meet its growth objectives. The scale achieved may also help reduce costs.
Going forward, another stock market crash may be favourable for M&G. Figures show investors rushed into the market in the last crash, and large asset managers benefitted the most. As one of the largest investment managers in the UK, M&G may benefit from another upset.
It’s also an income champion. The shares will yield nearly 10% this year, according to City analysts. As a result, investors will be paid to own the shares even if there’s no stock market crash in the second half.
Hargreaves Lansdown (LSE: HL) reported a jump in revenues in the first stock market crash. The online stock broker registered a boom in demand for new share-dealing accounts in the first half of this year. Investors rushed to take advantage of the market decline to buy the stocks they liked most.
There’s no certainty the same will happen if there’s another stock market crash. However, all stockbrokers tend to do well in market crashes. Volatile markets inspire trading activity. That means more commission revenue, so Hargreaves may benefit from this trend.
The company is also one of the biggest brokers in the market. That may mean the business benefits from the same size advantages as M&G.
There are other reasons why this company may be an excellent addition to a diversified portfolio in a stock market crash. Hargreaves is highly profitable and has a strong track record of growth. Over the past six years, net profits have grown at a compound annual rate of 9%. Meanwhile, the group’s profit margin has averaged 60%.
These high returns have helped the business achieve good returns for investors. The dividend payout has doubled over the past six years. Today, the yield stands at 2.5%.
Considering the company’s position in the market, and reported performance in the recent stock market crash, it looks as if it may continue to be a good investment. The group’s size is its most significant competitive advantage, and it seems unlikely it’ll be overtaken by another broker any time soon.
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Rupert Hargreaves owns shares in M&G Plc. The Motley Fool UK has recommended Hargreaves Lansdown. 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.