3 Ways to Beat the Next Market Crash

Earlier this year, the Dow Jones Industrial Average plunged into bear market territory — defined as a 20% or more drop from its most recent highs — in a mere 20 days, making it the fastest such decline in recorded history. Fortunately, the market has been recovering nicely over the past several weeks…

Since late March, the Dow Jones is up by more than 30%.

Still, another market crash isn’t entirely out of the question. In case it does happen, here are three things you can do as an investor to come out of it in one piece.

Don’t panic

Some of the most successful investors have a long-term mindset — and with good reason. Regardless of what happens in the short term, stocks of great companies continue climbing in the long run.

It is difficult not to feel at least a bit anxious watching the value of your securities drop significantly in a relatively short period. Depending on its severity, a stock market plunge can rattle even the most seasoned investor.

Taking your money out of stocks may seem like the smart thing to do during a market downturn — a phenomenon known as panic selling. Yet panicking is exactly the wrong thing to do if the market crashes.

It certainly makes sense to review the securities in your portfolio during a market crash. If you no longer think some of these securities have a bright future as a result of recent developments, getting rid of them may be wise. However, if a company’s investment thesis remains fundamentally unchanged by the factors that led to the market crash, sticking with it through thick and thin will likely pay rich dividends down the road.

Buy stocks of great companies for a discount

When the market plunges, it almost invariably leads to some great stocks being thrown in the discount bin. As such, a market crash can actually be an excellent time to buy stocks.

Of course, it’s important to set money aside in a robust emergency fund before using your cash to invest, particularly if the market crash in question is associated with broad economic challenges. However, if you have money to spare, you could score great deals on equally great stocks.

One stock to consider buying if the market crashes again soon (or even if it doesn’t) is Intuitive Surgica(NASDAQ:ISRG).

ISRG Chart

ISRG DATA BY YCHARTS

This medical device company hasn’t been spared by the ongoing crisis. It derives much of its revenue from the sale of instruments and accessories for its da Vinci Surgical System. Last year, the company’s instrument and accessories revenue was $2.4 billion, while its total revenue came in at about $4.5 billion.

However, the company’s instruments and accessories revenue largely depends on the number of procedures performed with the da Vinci robotic system, and many elective surgeries have been delayed amid the COVID-19 outbreak. In short, the pandemic is seriously disrupting Intuitive’s business.

Still, as the company itself says, “elective surgery does not mean optional,” and hospitals can only postpone these surgeries for so long.

As the dust settles, things should get back to normal for the healthcare company. Intuitive’s CEO Gary Guthart said, “While these procedures may be delayed in the short term without treatment of some sort, the disease and its impairment persist and often worsens. Said simply, the vast majority of these patients will ultimately seek treatment.” Intuitive still looks poised to dominate the robotic-assisted surgery market once the pandemic subsides.

The company holds a clear competitive advantage over most of its rivals in this space, and the market is still ripe for growth. Intuitive’s stock is worth buying, especially if its shares drop significantly as a result of a market crash.

Don’t try to time the bottom

While it makes sense to buy great stocks at a discount amid a market crash, trying to time the bottom is a losing strategy. Simply put, it is…

Continue reading at THE MOTLEY FOOL

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *