Since the stock market crash of 2020, I have speculated multiple times about whether another crash is likely. There have been a few occasions when the markets took a wobble, which suggested to me that it may in fact happen. One such recent scare stemmed from the international financial markets. Hong Kong’s stock markets were rocked by the near collapse of indebted Chinese property developer Evergrande. And the rest of the world felt the tremors as well.
The markets took their time, but they came back into balance. And by early November, they were racing ahead again. But once again, we have hit upon a potential obstacle that may well bring about another stock market crash. Coronavirus cases had already been rising in some parts of Europe, leading to increased restrictions. And now cases of the new coronavirus variant are increasing. It could get troublesome if vaccinations are not effective against it.
Falling FTSE 100 index
It is little wonder then that the FTSE 100 index saw a huge fall of 3.6% at the end of last week. This decline rivals falls seen around the time of the stock market crash last year. Even in today’s trading so far, the stock markets have shown no significant recovery. And if more bad news pours in, I reckon we could see a market crash soon.
The difference between the last one and the next one that could happen, is that we are better prepared for it. The last crash has shown that a stock market crash could in fact be a great buying opportunity for me. In this context, I often like to use Warren Buffett’s quote “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”.
Two stocks to buy
I would now make a list of all stocks that have run up a lot since the stock market rally that started in November last year. Some of them started rising even earlier. And their rise has been pretty much without breaks. One such FTSE 100 stock I can think of is JD Sports Fashion. The athleisure retailer might have been impacted by the lockdowns, but it has bounced back and so did its share price. In the last three years alone, its share price has almost tripled. It has made some acquisitions and if lockdowns were to happen again, it might not perform as well again. But going by its past performance, I would really like to buy more of the stock, much like I did during the last stock market meltdown.
I also like the industrial equipment rental company Ashtead, which is presently trading near all-time highs. With a price-to-earnings ratio of 32 times, it is far more expensive than the average FTSE 100 stock. But then its prospects look good too. It could take a hit if coronavirus cases spread much more in the US, where it does most of its business, but over the long term I would still be bullish on the stock. I would buy it now.
Manika Premsingh owns shares of JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. 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.
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