Accurately timing a market crash is not as easy as many people think. It’s easy to see when the market is declining, and investors are in full sell-off mode. But to time the instant when the market has truly hit rock bottom (and the companies are offering the most enticing valuations), is difficult, if not impossible.
There isn’t a lot you can do about that. What you can do is make up your mind about what you’ll buy when the market falls. It will help narrow your focus and ease the process of decision making for you. Identify the stocks based on what you want to add to your portfolio i.e., dividends, growth, or a mix of both.
An asset management company
Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) is an alternative asset management firm based in Toronto. It has a market capitalization of $67.7 billion and is currently trading at a price-to-earnings of 14.3. It’s not overpriced per se, but that’s because it’s still recovering from the crash in March. The company has assets worth over half a trillion dollars under management spread across over 30 countries.
The company has a considerable amount of assets on its books, and its total liabilities make up about two-thirds of its total assets. The company actually increased its revenue for the first quarter of 2020, unlike its peers.
It offers quarterly dividends, but the yield is unflattering (1.48%), even at this low valuation. The company increased its dividends by 38% in the past five years.
A better growth pattern can be seen in its share price, where the company is offering a 10-year CAGR of 17.7%.
A precious metal company
Whenever the market shows vulnerability, many investors start looking to gold. This is why even when such companies dip during a crash, they recover relatively swiftly. Wheaton Precious Metals (TSX:WPM)(NYSE:WPM) is one such company. This Vancouver-based precious metal streaming company is currently trading at a price 38% higher than its pre-crash one.
It’s one of the largest precious metal streaming companies in the world, with a market capitalization of about $26.8 billion. It offers dividends, but neither the yield nor the payout ratio is very attractive or safe.
Still, the company is currently trading at a price to earnings of 46.3 times, and managed to snag that kind of investor confidence due to its growth. The three-year CAGR of the company is 34.5%.
A tech company
Descartes Systems Group (TSX:DSG)(NASDAQ:DSGX) has been one of the most consistently growing companies over the decade. The company has served over 20,000 customers worldwide in its 30 years of operation. One of its core offerings is the logistics technology platform, which covers a network of over 160 countries and thousands of businesses across the globe. It offers logistics, supply chain, and trade solutions.
Descartes has a market capitalization of $6 billion, a total debt of $22 million, and a cash pile about 2.5 times bigger than that. Its liabilities are barely a tenth of its total assets, making its balance sheet very strong. But the best part about the company in its growth. Its 10-year CAGR is 28.8% and has only increased in recent years.
The three stocks combine a decent mix of dividends and growth. Currently, they are a bit overpriced, and as a value investor, you may not want to add them in your portfolio despite the growth potential. But if another crash comes, the prices are likely to be knocked down into a much more enticing range.
You may need to increase your liquidity in order to capitalize on another market crash fully.
Speaking of market crashes...
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.