It's not a matter of if a stock market crash will occur, it's a simply a matter of when.
Looking back, one thing is certain: Corrections and crashes are a normal part of the investing cycle. There have, in fact, been 38 double-digit percentage declines in the benchmark S&P 500 since the beginning of 1950, which works out to a sizable drop in the broader market, on average, every 1.87 years.
However, these big declines shouldn't be feared. Rather, they should be cheered by long-term investors. That's because every crash or correction in history has eventually been erased by a bull-market rally. When a stock market crash strikes, it's time to go on the offensive as an investor. The following five stocks would be the perfect no-brainer buys the next time a crash rears its head.
Image source: Getty Images.
Alphabet
If the FAANG stocks have taught investors anything, it's that their industrywide dominance makes them no-brainer companies to buy anytime a sizable correction strikes. That's why the advertising-dependent Alphabet (GOOGL -1.97%) (GOOG -1.96%) is such a smart buy.
Alphabet is comprised of multiple operating segments, none of which is more well-known or dominant than its Google internet search engine. How dominant, you ask? According to data from GlobalStats, Google has controlled anywhere from 91% to 93% of worldwide internet search for the past two years. With a veritable monopoly on search, it's no wonder advertisers willing to pay top-dollar for search placement. Even if ad spending pulls back during recessions, history shows that periods of expansion last many years longer than recessions. Thus, Google's search operating model is playing a numbers game that it's bound to win.
Alphabet is about more than just Google, too. Streaming content service YouTube is one of the top-three social media destinations in the world and is generating annual run-rate revenue of $24 billion, through the first quarter. Meanwhile, cloud infrastructure segment Google Cloud has consistently been growing sales by close to 50% on a year-over-year basis. Cloud's higher margins will eventually allow Alphabet's cash flow to rocket higher.
Image source: Getty Images.
UnitedHealth Group
Healthcare stocks are always a smart place to put your money to work during periods of heightened volatility. That's because healthcare companies are defensive. In other words, people can't control when they get sick or what ailment(s) they develop, which means the demand for drugs, devices, and services remains relatively constant no matter what. That's all good news for insurance and healthcare services giant UnitedHealth Group (UNH 1.35%).
Most folks are probably familiar with UnitedHealth for its employer and individual healthcare plans. According to the company, it offers health plans to roughly 26 million Americans. With President Joe Biden pledging to rebuild and expand the Affordable Care Act, there's a good possibility UnitedHealth can add to its already large member base. And it certainly doesn't hurt that health-benefit providers can pass along premium hikes to cover their expenses each year.
Interestingly, though, it's not health insurance that's been UnitedHealth Group's key growth driver over the past decade. That title goes to healthcare services segment Optum. Optum provides an array of services, including pharmacy care and prescription refilling services, as well as data analytics to hospitals and health-based organizations. Optum is growing at a faster rate than the insurance portion of UnitedHealth's business, and it often delivers a superior operating margin. Optum could well be the company's ticket to surpassing Johnson & Johnson and becoming the most-valuable healthcare company.
Image source: Getty Images.
Trulieve Cannabis
Similar to healthcare stocks, marijuana stocks are a wise place to invest your money during a stock market crash. As we witnessed during the coronavirus crash and subsequent recession, cannabis behaves like a traditional consumer good. This is to say that consumers keep buying it, no matter how well or poorly the economy is performing. That's what makes Trulieve Cannabis (TCNNF -6.26%) a no-brainer pot stock to buy when a crash strikes.
Trulieve is one of many multistate operators (MSO) trying to make their mark in the lucrative U.S. weed market. But it has a very unique operating model, relative to other MSOs. What's interesting is that 82 of its 88 operational retail locations are in medical marijuana-legal Florida. By completely saturating the Sunshine State, it's been able to effectively build up its brand and create a loyal following without having to spend big bucks on marketing. The end result is 13 consecutive profitable quarters and roughly half of the Sunshine State's dried flower and cannabinoid oils market share.
The highly profitable Trulieve also hasn't been afraid to use acquisitions to its advantage. It recently announced its intention to acquire MSO Harvest Health & Recreation (HRVSF) for $2.1 billion in an all-stock deal. Harvest Health has a presence in five states, one of which happens to be Florida. On top of further solidifying its presence in its home market, it'll be inheriting Harvest Health's 15 operational dispensaries in Arizona, which recently legalized recreational cannabis. Trulieve should be able to successfully apply its Florida blueprint to Arizona.
Image source: Getty Images.
Mastercard
Alphabet isn't the only company that benefits from long-winded periods of economic expansion. History has shown that anytime investors can get a sizable discount on payment facilitator Mastercard (MA -0.08%) during a crash or steep correction, they should take it.
As with practically all financial stocks, Mastercard is a cyclical business. This means it struggles when the U.S. and global economy are contracting, because that's when consumers and businesses are more likely to pull back on their spending. The thing is, these periods of contraction or recession usually last no longer than a few quarters. By comparison, Mastercard benefits in a big way from bull markets and periods of economic expansion. These expansions often last multiple years, if not a full decade. Mastercard is the perfect example of patience paying off for long-term investors.
Take note that Mastercard has also avoided becoming a lender. While this does mean it's turning down the opportunity to collect interest income and fee revenue during long periods of growth, Mastercard doesn't have to worry about setting cash aside to cover credit delinquencies when inevitable recessions arise. This is a big reason why Mastercard's operating margins are consistently north of 40%.
With multiple regions of the world still underbanked, Mastercard remains a no-brainer growth story to buy during any big stock market downturn.
Image source: Getty Images.
Finally, a stock market crash would be the perfect occasion to buy shares of social media giant (and FAANG stock) Facebook (META -10.56%).
Facebook's dominance in the social media space is jaw-dropping. As of the end of March, the company had 2.85 billion monthly active users (MAUs) visiting its namesake site, with another 600 million unique MAUs visiting WhatsApp and Instagram, which Facebook also owns. That's 3.45 billion people, or 44% of the global population, visiting a Facebook-owned asset at least once a month. With this many eyeballs, Facebook holds massive pricing leverage over advertisers. In fact, the company's ad revenue surged by a double-digit percentage throughout 2020 (i.e., the most-challenging year for the U.S. economy in decades).
The craziest thing about Facebook is realizing that CEO Mark Zuckerberg hasn't even fully depressed the gas pedal. Despite pacing more than $101 billion in annual ad revenue in 2021, the company isn't meaningfully monetizing Facebook Messenger or WhatsApp. This ad revenue is almost entirely coming from its namesake site and Instagram. Imagine how quickly Facebook's operating cash flow I going to grow once it begins monetizing two of the six most-visited social platforms in the world.
