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3 Stocks I'll Be Buying When the Market Crashes Again

By Alex Carchidi – Jul 9, 2020 at 7:04AM

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These three companies have the resources and the positioning to survive the harshest of economic conditions.

After March's crash and the ongoing discussion about whether the stock market is disconnected from macroeconomic fundamentals, savvy investors are right to plan for a future downturn. Buying any of these three stocks during a market crash or a recession will help to protect the overall value of your portfolio while ensuring that you benefit from the market's recovery afterward.

A graph of a stock price falling.

Image source: Getty Images.

Johnson & Johnson

Johnson & Johnson (JNJ -1.85%) is one of the world's largest companies, with a market cap of $377 billion and $83 billion in trailing 12-month revenues. Thanks to its cornucopia of healthcare products, dozens of different drugs in development, and a massive roster of consumer goods with steady demand, Johnson & Johnson is positioned to retain its value -- and its dividend yield of 2.66% -- even when the market crashes.

As demonstrated by its profit margin of nearly 21%, the company is successful in the massive, highly competitive markets in which it operates -- markets where growth is very hard to come by. This means that in the aftermath of a crash, Johnson & Johnson is prepared to bounce back as soon as possible, even if consumer demand drops. It also means that the company's normal operations have left it with more than $18 billion in the bank, which it could subsequently use to weather a downturn more gracefully than its competitors.

However, potential investors should note that on the basis of its past activity during crashes, this stock's price is unlikely to go completely against the trend, so it's probably preferable to wait for the steepest market losses to abate before investing.

Thermo Fisher Scientific

Thermo Fisher Scientific (TMO -0.43%) doesn't have the broad base of consumer goods that Johnson & Johnson has, but it does have a similarly commanding presence in the pharmaceutical, chemical, and biotech industries.

Because Thermo Fisher sells products in every segment of the value chain in each of these industries, it's remarkably resilient: Thirty-nine percent of the company's revenues last year were derived from laboratory products and services, meaning that even if the market tanks, the ongoing efforts to contain the pandemic will guarantee Thermo Fisher a steady stream of revenue.

What's more, only half of Thermo Fisher's revenues are from its sales in North America, and the company's Chinese market grew by 13% in 2019, making it increasingly diversified geographically. This means that if a market crash disproportionately affects one regional market, Thermo Fisher's international operations could spare it from a total rout.

As a mature company, Thermo Fisher has a respectable profit margin of 14.3% and revenues of $25.7 billion, providing the leeway it needs to adapt to changing conditions. Though its dividend yield is less than half of a percent, a market crash would be the perfect time to grab Thermo Fisher stock at a discount -- something that investors might be keenly awaiting, given that the stock's price-to-earnings ratio of about 42 suggests that it might presently be overvalued.

JNJ Chart

JNJ data by YCharts.

Bristol Myers Squibb

Bristol Myers Squibb (BMY -0.40%) is one of the world's leading pharmaceutical companies and perhaps the single strongest competitor in the markets for oncology, immunology, and hematology drugs, making it a relatively innovative stock to buy during a downturn. While its profit margins are slim at 3%, the company has dozens of different drugs in development or on the cusp of regulatory approval, which should guarantee its future viability as well as future revenues.

The company's pipeline is so packed with late-stage projects that even during a severe crash, its stock could be buoyed repeatedly by a torrent of positive news about newly approved indications or advancements through clinical trial phases.

Furthermore, with a forward dividend yield of 3% and a leadership with a history of increasing dividends and performing stock buybacks, Bristol Myers Squibb is a healthcare investor favorite. As with Thermo, the company's price-to-earnings ratio of 94 might suggest that it is overvalued, meaning that a market crash would be a great time to buy it at a discount.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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