When the COVID-19 pandemic stuck, there was panic everywhere. Many governments announced emergency plans and within days unleashed hoards of cash in the economy. The stock market crashed, falling more than 30% in less than a month. Warren Buffett had said to buy when others sell. Even though he didn’t follow his advice, those who did have made a fortune in the last four months.
Many analysts are saying that another stock market crash is inevitable. I am divided over this, as investors are braced for another market crash. If you are already prepared for an emergency, then its impact is mitigated. If there is another market crash, it won’t be as severe as the March crash.
What to do if there is another stock market crash
In March, almost every stock dipped double digits. Some stocks even halved or fell as much as 70%. This dip came, as nobody knew how the pandemic would impact the businesses. Moreover, investors wanted to hold cash to prepare for any emergency.
Learning from March sell-off, I would follow Buffett’s advice and buy when others sell. I would put my money in the three stocks that quickly adjusted to the changing business environment.
Shopify stock
Shopify (TSX:SHOP)(NYSE:SHOP) has become the ultimate virus stock, as all retailers, big and small, are using its platform to open their online stores. Even before the pandemic, Shopify (5.9% share) became the second-largest e-commerce platform after Amazon (37.3% share) in the United States. The pandemic gave Shopify a boost, doubling its second-quarter revenue. The company is introducing new features, such as abandoned cart recovery and curbside pickup.
Shopify will see some correction in the third quarter when its 90-day free trial ends, and retailers have to pay subscription fees. However, it will see an increase in its revenue, as the pandemic has helped it tap the grocery and food retail segment, which was reluctant to go online.
Today, Shopify has a crazy valuation of 75 times its sales per share, which is not a good buy point. If you invested $20,000 in Shopify in mid-March, you would now have $57,000. If there is another market crash and the stock falls over 20%, I will buy it, as it has strong growth potential.
Lightspeed POS stock
Lightspeed POS (TSX:LSPD) provides point-of-sale (POS) solutions for physical stores. The stock fell 70% in March, as its customer base of retailers and restaurants closed their physical stores and canceled their subscriptions. However, its e-commerce volumes surged 400% in April. Hence, it focused on its online offerings, like curbside pickup, appointment booking, and contactless payments that facilitate social distancing.
These changes saw a major uptake of the Lightspeed platform by new retailers. The stock has recovered to its pre-pandemic level, surging over 200% in the last four months. If you invested $20,000 in it in mid-March, you would now have $65,500.
Lightspeed stock is trading at 20 times its sales per share. It’s a good investment even at its current price. But if there is a market crash and the stock dips more than 20%, it can triple your money in a few years.
Facedrive share
Facedrive (TSXV:FD) is in the ride-sharing business, which is the worst business to be in during a pandemic when nobody is traveling. As expected, its stock halved in March, as it absorbed the pandemic crisis. However, it turned the tables in its favour by leveraging its expertise in software development and car network to venture into alternative businesses.
Facedrive acquired food delivery service Foodora and developed a Bluetooth-enabled COVID-19 contact tracing app TraceSCAN for wearables. As the economy re-opens, it is promoting its ride-sharing business as a safe way to travel while maintaining social distancing.
With these efforts, Facedrive stock jumped 860% in the last four months. If you invested $20,000 in it in mid-March, you would now have $192,000. If there is another market crash and the stock falls over 30%, it is a buy, as it can grow in two to three years.
Bottom line
Anybody who invested $20,000 each in the above three stocks in mid-March would have around $315,000 by now.
