The markets have been nervous lately. Everything from vaccine resistance worries to US monetary policy has been feeding into a jittery stock market on both sides of the pond. As an investor, I think a stock market crash could present me with a good buying opportunity. I don’t know if the stock market will tumble any time soon, but I am prepared in case.
Here are three shares on my watchlist I will consider buying if they slump during a stock market crash.
Yield on sale
One of the highest yielding FTSE 100 shares is British American Tobacco. Currently the dividend yield is 8.0%. On top of that, the company has an attractive record of raising its dividend. It has done so every year this century.
No dividend is ever guaranteed, however. Risks include a large debt pile, and declining cigarette use in many markets. That could hurt both profits and revenues. On the bullish side, I like the company’s massive cash flows, which are helpful in supporting the dividend.
As last year showed, an economic downturn isn’t necessarily very damaging to the company’s sales. So, if the shares are marked down as part of a wider stock market crash, I would consider adding to my position.
Financial services pick
Even at the current share price, insurer Legal & General yield 6.7%. But that’s after the share price rose 15% over the past 12 months. In fact, it’s 48% higher than the lows it touched during that period.
If I had managed to buy the shares then, at 176p, I would now be looking at a double-digit yield. Market timing is difficult, and it’s impossible to call a bottom with any certainty. But I will be keeping an eye on the Legal & General share price in the event of any stock market crash, in case an attractive entry point opens up.
With a strong brand, and buoyant customer demand, I see continued bright prospects for Legal & General. But one risk is pricing competition in the insurance market, which could eat into profit margins.
Stock market crash and Howdens Joinery
I like the Howdens Joinery business as I think demand for timber and similar products should remain strong for years to come. The chain sells items which help housing construction, but also renovation. So it could continue to do well even if new housebuilding slows down. However, the Howdens Joinery share price has increased 75% in the past year. It is not nearly as cheap as it once was.
That is why I will be keeping an eye on the Howdens Joinery share price in the event of any stock market crash. If it tumbles to the sort of price it stood at on some days last year, I would consider adding it to my portfolio. However, one risk here is that any economic downturn that sends the stock market crashing could also lead to a tightening in consumer spending on household renovation. That could hurt sales at Howdens.
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Christopher Ruane owns shares in British American Tobacco. The Motley Fool UK has recommended British American Tobacco and Howden Joinery Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.