The stock market continues to swing wildly in 2020. In February, soon after COVID-19 began to spread around the world, the equity markets fell by 35% in just over a month. The pandemic decimated multiple sectors and shaved off significant investor wealth. However, the snap-back rally…
witnessed since March was equally surprising, as indexes were trading at record highs by September. Right now, the S&P 500 is 5% below its record high, after losing 1.9% yesterday.
The volatility is far from over, especially now that COVID-19 cases are on the rise once again. This suggests that economic lockdowns may be reimposed, which could create significant challenges for multiple industries. Companies in the airline, tourism, hotels, and energy sectors are already trading at multi-year lows.
Is a market crash inevitable?
We can see that the stock market is not in sync with the economy, given subdued consumer spending and falling GDP figures. So, a market crash is a real possibility given multiple structural issues impacting global economies.
Yet, savvy investors often look at such market sell-offs as buying opportunities. In the last few decades, the S&P 500 has undergone a correction (which is a decline of more than 10%) once every two years on average. However, every time it has rebounded and made new highs.
Today we’re going to look at three stocks that you should consider buying if the market crashes.
An e-commerce player
Companies in the e-commerce segment have overperformed the market in 2020. The pandemic has acted as a tailwind for online platforms as consumer behavior has changed drastically and the accelerated shift towards e-commerce shopping will continue to drive top-line growth in the upcoming decade.
One stock that has the potential to generate explosive returns is Etsy (ETSY), an online marketplace for handmade products. Over the years, Etsy has improved its search functions and usability that has increased the number of buyers and sellers on its platform.
In the second quarter, Etsy grew its active buyers by 41% while active sellers were up 35% year-over-year. The company’s sales were up 137% while gross transaction volume soared 147% in Q2. Etsy stock has already tripled year-to-date and is valued at a market cap of $17.8 billion. This means the stock is trading at a forward price to earnings multiple of 72x and a price to sales multiple of 12x which is reasonable given its growth rates and expanding addressable markets.
Analysts tracking Etsy expect earnings to grow by 57% annually in the next five years.
A health-tech giant
Another company that has delivered on its promise amid the coronavirus chaos is Teladoc (TDOC). Shares of Teladoc are up 153% in 2020 valuing the company at a market cap of $17.6 billion. The company provides virtual healthcare services and its platform allows patients and healthcare professionals to have an integrated experience via mobile, web as well as phone-based access points.
The long-term prospects for Teladoc…
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