I have a list of UK shares I’d look to buy cheap for my holdings if a stock market crash were to occur. One pick is Sage Group (LSE:SGE).
Accounting and payroll
Sage Group specialises in accounting and payroll software for small to medium-sized businesses. It recently shifted to a software-as-a-service (SaaS) subscription model to keep up with evolving technology and digital transformation.
As I write, Sage shares are trading for 681p. At this time last year, the shares were trading for 592p, which is a 15% return over a 12-month period. The shares are down almost 20% in 2022. I believe this is because many stocks in growth sectors like Sage, have experienced an investor sell-off. This has been caused by economic uncertainty, and led to investors looking at more defensive options.
A UK share I like
In the event of a stock market crash, I’d add Sage shares to my holdings. Here’s why.
Firstly, Sage has a good track of performance, although I do understand past performance is not a guarantee of the future. Looking back, I can see it has recorded revenue of over £1.85bn for the past four years in a row. Coming up to date, a Q1 trading update released at the end of last month mentioned recurring revenue was up 8% compared to the same period last year. Furthermore, software subscription was up by 13% and new customer wins were also up.
Sage pays a dividend that could make me a passive income. At current levels, it sports a yield of over 2%. I do understand dividends could be cancelled in the event of a market crash. In Sage’s case, I’d expect the dividend to be reinstated over time.
Sage has a robust balance sheet that should see it through any downturn. When the last crash occurred, many UK shares had to borrow money to keep the lights on. Those with healthy balance sheets were able to weather the storm.
I believe the biggest risk to any stock market crash recovery and general growth for Sage is that of competition. In its respective sector, there are many players. One that springs to mind is tech giant Xero, which recently created its own payroll and accounting offering. This could hinder Sage and eat into its market share.
What could cause a market crash?
In 2020, it was a global pandemic the likes of which this generation has never seen. Other causes can be struggling world economies as well as surging inflation or major wars.
At this moment, it seems struggling world economies and surging inflation could cause a market crash. Inflation in the US is a concern. The last time inflation reached levels such as now was in 1982 and a crash occurred. In addition to this, another of the world’s largest economies, China, has seen its growth slow to levels not seen in approximately two years and is in the midst of a real estate crisis.
Finally, geopolitical tensions between Russia and Ukraine, including the mobilisation of troops, has led many to fear a war could break out. This could also lead to a stock market crash.
It is worth noting no one can accurately predict if a crash will occur. If it does, I have a list of UK shares I’d add to my holdings, including Sage Group.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Sage 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.
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