5 brand-name stocks to buy during a stock market crash

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A year ago, the stock market was facing historic levels of volatility in the wake of the 2019 coronavirus disease (COVID-19) pandemic. It took the reference S&P 500 only 33 calendar days to lose more than a third of its value, and the CBOE Volatility Index, which measures the expected volatility of S&P 500 options contracts over the next 30 days, hit an all-time high.

It was a tough time to be an investor – and the second round could approach.

Uncertainties persist over COVID-19, but this time stock valuations have reached their second-highest level in history. When combined with other factors, such as rising yields threatening to halt the housing boom, it becomes clear that there is a recipe for a stock market crash.

If the current market correction were to accelerate into a full-blown crash, the smartest decision for investors might be to buy profitable brand stocks with proven operating models. Below are five brand name stocks worth buying during a stock market crash.

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1. Visa

One of the smartest securities to buy when heightened volatility arises is the Payment Facilitator. Visa (NYSE: V).

Buying Visa is like playing a numbers game where the odds are strongly in your favor. As a business that generates revenue based on the amount businesses and consumers spend with merchants in its network, Visa depends on a growing economy. While contractions and recessions are a natural part of the business cycle, the vast majority of recessions and stock market crashes can be measured in months. During this time, periods of economic expansion and bull markets often last for many years. With Visa, you buy a stock that accumulates for a very short time and then thrives for years.

Visa also benefits from its conservative approach to payments. Although some of its peers also choose to lend directly, and thus are able to generate interest income and fees during periods of expansion, Visa is not a lender. This decision to avoid lending means Visa doesn’t have to set aside capital to cover loan and credit losses during contractions and recessions. This is one of the main reasons Visa’s profit margin is consistently above 50%.

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2. Costco wholesale

If things start to get risky with the market, investors can always consider putting money to work in the warehouse club. Wholesale Costco (NASDAQ: COT), which happens to be ride a 12-year streak of positive total returns (i.e. including dividends) to its shareholders.

The obvious advantage of owning a stake in Costco is that it is motivated by many necessary purchases. While discretionary shopping helps to increase Costco’s margins, the mere fact that it carries food and drink (ie.

Costco too gets a boost of its membership-based operating model. The fees generated by the company‘s annual memberships increase margins and help lower prices for traditional retailers and grocers. The size of the company and its wholesale purchases also help improve traditionally very slim margins.

Plus, paying a fee to buy from Costco can help encourage shoppers to stay loyal to the brand. With a lot of e-commerce momentum on its side in the wake of the pandemic, Costco Wholesale is a stock investors can trust.

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3. NextEra Energy

Another smart way for investors to grow their money in a crash is to buy in highly defensive sectors. A branded stock that comes to mind is NextEra Energy (NYSE: NEE), the largest electricity stock by market capitalization in the United States.

On a broader basis, the demand for electricity and natural gas does not change much from year to year. Since electricity is something that all homeowners and tenants alike need, investors can count on a predictable level of cash flow each year from utility stocks.

More specific to NextEra, it is the leader in renewable energy capacity in the USA. No other utility generates more capacity from wind or solar power. While these green energy projects can be expensive, the payoff is significantly lower power generation costs and a sustained growth rate in the high numbers. Compare that to the typical utility, which averages low single-digit growth.

NextEra is not finished either. Between 2019 and 2022, the company reiterated a spending plan of $ 50 billion to $ 55 billion in capital spending. Much of this CapEx will cover renewable energy options. With bold projects in its coffers, such as installing 30 million solar panels in Florida by 2030, NextEra Energy can be the light for investor portfolios during a crash.

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4. Bristol Myers Squibb

If you’re looking for a company with stronger growth prospects than a utility company, but still crave the security of a defensive sector, healthcare stocks can be the perfect addition to your portfolio. In particular, pharmaceutical stock Bristol Myers Squibb (NYSE: BMY) can be money.

Bristol Myers raised eyebrows in 2019 when it completed the gigantic acquisition of cancer drug developer Celgene. Last year, a successful multiple myeloma drug Revlimid generated more than $ 12 billion in net sales and continued a long streak of double-digit annual growth. Revlimid has benefited from label expansion opportunities, strong pricing power, increased shelf life, and improved screening diagnostics that have helped patients detect cancer earlier.

But the company is also growing organically. Eliquis generated nearly $ 9.2 billion in net sales last year for Bristol Myers and is the world leader in oral anticoagulants. Meanwhile, Opdivo Cancer Immunotherapy has achieved sales of around $ 7 billion and is tested in dozens of clinical trials as monotherapy or in combination. The label’s expansion could push Opdivo north of $ 10 billion in annual sales.

Since people don’t decide when they get sick or what disease (s) they develop, drugmakers are a good bet to be successful in any environment.

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5. Facebook

Finally, consider putting your money at the service of the brand growth stocks which absolutely dominate their respective industries. A perfect example would be the linchpin of social media Facebook (NASDAQ: FB).

Think about it for a moment: Facebook ended 2020 with 2.8 billion people visiting its namesake site each month. 500 million additional unique people visited one of its other assets: WhatsApp or Instagram. This is 3.3 billion people – over 40% of the world – visiting an asset owned by Facebook at least once a month. Advertisers fully understand that they can’t go anywhere else and get that kind of depth or targeted audience.

What’s even crazier is that Facebook generated over $ 84 billion in ad revenue in 2020 from its namesake site and Instagram. It hasn’t even started hitting the accelerator on WhatsApp or Facebook Messenger yet, despite both being the top five destinations for social media users. Once these assets are monetized, Facebook’s cash flow could really explode.

If Facebook ad revenue can rise 21% during the worst economic downturn in decades, it should very well survive a stock market crash.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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