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3 Top Stocks to Buy in a Market Crash

By Daniel Sparks – Jun 20, 2020 at 10:31AM

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If these high-quality stocks fall 10% or more, investors should consider adding them to their portfolios.

The coronavirus market crash in February and March likely tested many investors. Not only did most major market indices fall more than 30% by the second half of March, but the majority of indices haven't fully recovered yet. In fact, the S&P 500 is still down almost 9% since its peak in February.

With daily new coronavirus cases trending up again in some U.S. states, and given the continued uncertainty surrounding the economy, some investors may be thinking another market crash could be around the corner. If stocks do fall sharply again, investors want to have some investment ideas ready so that they're able to pounce on any notable buying opportunities. Three stocks that look fairly attractive today but would be exceptionally enticing if they fell by 10% or more are Twitter (TWTR 0.43%), Walt Disney (DIS -2.60%), and Netflix (NFLX -4.49%).

A chart showing a stock price falling rapidly.

Image source: Getty Images.

Twitter

Social network Twitter certainly didn't go unscathed from the economic damage of lockdowns and travel restrictions. With a business model dependent on advertising, the company unsurprisingly saw its revenue take a hit in March as many marketers paused or slashed their advertising spend. 

But investors should note that the coronavirus pandemic also showed how vital Twitter's platform is during times of uncertainty. The company saw its daily active user growth surge 24% year over year during Q1 -- a record growth rate for the platform.

If the market crashes again, users will almost certainly turn to Twitter to find real-time news stories and discuss current developments. Even more, many of the users that Twitter gains during heavy news cycles will likely stick around as they become accustomed to using the service. This fresh, new user base ultimately represents a long-term monetization opportunity for the microblogging platform.

When the economy finally starts firing on all cylinders, Twitter will likely rake in substantial advertising dollars on a much larger user base.

Walt Disney

Media-giant Walt Disney also looks like an attractive market crash buy. While the company is undoubtedly susceptible to the ripple effects of market downturns and economic recessions, the powerful brands under its ownership have some of the best staying power in media.

From its namesake Disney-branded film business to iconic brands like Star Wars, Marvel, Pixar, and X-Men, the company's assets will provide valuable entertainment to consumers for decades to come. Then, of course, there's the media conglomerate's world-renowned theme parks and successful streaming services -- Hulu and Disney+.

Disney+ logo

Image source: The Walt Disney Company.

While shares of Disney have recovered meaningfully from March lows, they're still notably down more than 20% year to date. If the stock fell another 10% from here, it would likely prove to be a bargain for anyone willing to hold the stock for the long haul.

Netflix

If you're searching for a stock that looks cheap during a market crash, you may want to pass on this one. Shares of Netflix -- a growth stock in its purest form -- are quite pricey. But one thing investors have learned during the recent coronavirus market crash is that streaming-TV giant Netflix's business is extremely resilient, making its stock's premium price tag worth paying up for.

Today, Netflix has a price-to-earnings ratio (P/E) of 92. This compares to the P/Es of Twitter and Disney of 39 and 21, respectively. But the company boasts an incredible growth trajectory, making this price tag seem fairly reasonable.

In each of the previous four quarters, revenue grew at least 26% year over year. Even more notable, Netflix's operating margin is expanding rapidly, demonstrating the scalability of the company's business model. For instance, in the first quarter of 2020, the streaming giant's operating margin was 16.6%, up from 10.2% in the year-ago period.

If the market crashes again and investors get an opportunity to buy Netflix at a 10%-plus discount from today's price, they might want to consider taking action.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix, Twitter, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$226.41 (-4.49%) $-10.64
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$99.50 (-2.60%) $-2.66
Twitter, Inc. Stock Quote
Twitter, Inc.
TWTR
$41.58 (0.43%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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