If you had cash ready to put to work during the 2020 market crash, you could have made a fortune. It’s easier said than done to invest during a market downturn, but those that were brave enough to invest during the COVID-19 market crash were likely rewarded very handsomely.
The COVID-19 market crash was significantly different than the last recession that Canadians experienced.
During the Great Recession, the Canadian stock market lost about half its value, but the crash occurred through the better part of a year. In 2020, the S&P/TSX Composite Index crashed more than 30% in a shocking one-month period.
The Great Recession was a long and grueling market crash. The upside was that investors had plenty of time to take advantage of discounted prices. In 2020, investors had to be ready to strike.
Preparing for a 2021 market crash
If the 2020 market crash taught investors one thing, it’s that it’s extremely important to be prepared for whatever the market throws at us. I’m not just talking about being prepared defensively, with a well-stocked emergency fund. I’m talking about being prepared to be able to take advantage of a steep market crash by putting cash to work.
I’ll admit, based on historical data, that the odds of another market crash happening in 2021 are low. The two reasons why I believe that it’s certainly not out of the question, though, are because of the sky-high valuations and the high level of uncertainty in the market right now.
Vaccines have already begun being distributed in Canada, but it is still far too difficult to accurately predict when the economy will return to pre-COVID-19 levels. And it’s not just the economy’s health that’s in question. Certain industries, such as travel, are even harder to predict how they will rebound.
Whether the next market crash is in 2021 or 2031, long-term investors would be wise to have a game plan of how they’ll handle it.
Here are two growth stocks that Canadian investors will want to load up on during the next market crash.
Market crash stock #1: Shopify
Valued at a market cap of $170 billion, Shopify (TSX: SHOP)(NYSE:SHOP) is Canada’s largest company.
After growing close to 4,000% over the past five years, Shopify likely has its record-growth days behind it. That does not mean the tech stock will have any trouble outpacing the Canadian market, though.
Shopify has grown quarterly revenue at a growth rate just shy of 100% over the two most recent quarters.
The recent success can be partially attributed to the increased demand caused by the COVID-19 pandemic. The tailwinds of the growing e-commerce industry will only help fuel the market-beating growth for Shopify shareholders for many more years.
Valuation is possibly the only serious knock against Shopify today. The tech giant trades at a price-to-sales (P/S) ratio of almost 70.
There’s a good chance Shopify will continue to crush the market’s returns over the next decade, but it’s going to be a bumpy ride.
Market crash stock #2: Docebo
Sticking with high-growth tech stocks, Docebo (TSX: DCBO)(NASDAQ: DCBO) is another company you’ll want to grab shares of during the next market crash.
The tech stock might not be trading at a P/S ratio of 70, but it’s not far behind. Docebo trades at a very frothy P/S ratio of 45.
The tech company lost close to 40% of its value during the market crash in 2020. But since the beginning of April, Docebo shares are nearing a 500% gain.
It’s been an unbelievable run for Docebo shareholders over the past 10 months. The company has benefitted from a surge in demand that was caused by the COVID-19 pandemic.
The company provides enterprise-level clients with cloud-based, AI-powered training platforms. As there was a huge shift towards employees working remotely last year, Docebo saw an instant lift in sales. That lift has led to monster growth in share value, and there’s still plenty of growth left.
