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He FTSE 100 It’s down about 700 points in the last few weeks, but I’d call it a crash rather than a full stock market crash.
We can still have an accident like what BlackRock’s Larry Fink calls a “slow bearing” The crisis spreads through the banking sector. If we do, I will try to profit by buying these top three stocks at low prices and holding them for the long term.
Falling stocks are cheaper
The FTSE 100 includes some terrific dividend stocks at the moment, and their returns will only increase if share prices fall further. As a fund manager, schroders (LSE: SDR) could be on the front lines of the next big sell-off. If so, it might suddenly seem like a much better value.
Schroders has had a tough year, its share price falling 20% as volatile markets hit assets under management and performance-related fees. Operating profit fell 14% year-on-year but was still strong at £723m.
A full crash would certainly do more damage, and that’s when I’d swoop in. That will reduce the valuation to 14.9 times earnings and increase the dividend yield. Today, Schroders would pay me a rent of 4.81% per year. A drop could push it well above 5%.
If the FTSE 100 crashes at some point, I would also like to buy an equipment rental company. Ashtead Group (LSE: AHT). I have been eager to buy this fast growing company for years, but it has always been overpriced.
This US-focused company continues to grow, posting a 26% rise in pre-tax profit to $535m in the most recent quarter, with revenue up 21% to £2.4bn. The board now expects full-year results to exceed expectations, keeping demand for the shares and the share price high.
Buy low then hold and hold
Today Ashtead is trading at 19.5x earnings and yielding 2%, about half the FTSE 100 average. A stock market crash could tip both figures in my favor without touching the underlying case to buy it.
Every business faces challenges, in this case it is “supply chain constraints, inflation and labor shortages”, in CEO Brendan Horgan’s own words. I still think it looks like a great long-term buy and hold. I would like a lower entry point.
You would apply a similar approach to the consumer credit reporting company Experian (BVL: EXPENDITURE). He is widely admired for his super-deep defensive moat, because new entrants would have a hard time matching his unlimited data set. The company also has a global reach, constantly moving into new markets, but it’s expensive.
Experian is currently trading at around 25.8 times earnings while yielding is underperforming at 1.6%. Hopefully, a crash could make both of these figures look more attractive, although, as always with stocks, there’s no guarantee. While many of my favorite FTSE 100 stocks have seen double-digit falls over the past week, Experian is down a modest 5%.
The risk is that it could infringe on consumer privacy concerns, despite its recent victory against the Information Commissioner’s Office over how it treats personal information. I would like to have Experian, but not at the current price and performance. Let’s see if this year’s stock market volatility gives me a buying opportunity.
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