Please ensure Javascript is enabled for purposes of website accessibility

2 Stocks to Buy When the Next Market Crash Comes

By Parkev Tatevosian, CFA – Aug 12, 2021 at 8:38AM

Key Points

  • The price of each of these stocks is up over 150% over the last three years.
  • These two companies also have strong long-run tailwinds at their back.
  • If valuation causes you hesitation, put these stocks on your list and wait for a market crash to buy.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Planning your actions ahead of market crashes makes following through easier.

Roku (ROKU 0.50%) and Chewy (CHWY -1.85%) are two excellent companies growing revenue and customers rapidly. Investors have noticed, and their stock prices are up 289% and 154%, respectively, over the last three years. 

One way you can get into these stocks at better prices would be during a stock market crash. Admittedly, it can be difficult to be a buyer when you see the market selling off. That's why it pays to look into companies you are interested in buying and put them on your list so that you can be ready to make the buy when the event occurs.

Here are a few features of each stock that make these two companies attractive investments in the long run. 

A chart displaying the stock price increases of Roku and Chewy.

Data source: YCharts

1. Roku

Roku is benefiting from the long-run secular trend where consumers are switching from linear TV to streaming viewership. The rate of the shift may fluctuate but it's unlikely to change direction. According to Roku management, eventually, content will be 100% streaming. Indeed, here is what founder and CEO Anthony Wood said in its most recent conference call:

But I think the big picture for me is that we're still in the middle of this transition where viewers, advertisers, and the industry is moving 100% to streaming. We're just not there yet, but it's moving and it's happening. If you look, one stat I think that's interesting from Nielsen is that if you look at 18 to 45-year-olds, 39% of their TV watching is streaming.

Roku has accumulated 55.1 million accounts, a 28% increase from the second quarter of last year. Undoubtedly, the pandemic helped accelerate customer acquisition. Folks were limited in entertainment options when ballparks, concerts, restaurants, and movie theaters were all shut down for most of the previous year. 

The company's operating system is reliable and fast. That's led many original equipment manufacturers to build TVs with Roku's operating system natively installed. Roku is the No. 1 TV operating system in the U.S. and Canada, and it's well on its way to international expansion.

A smiling person and their dog outside.

Image source: Getty Images.

2. Chewy 

Chewy is an exclusively online pet retailer. The company boasts 19.8 million active customers, 31.8% more than it had last year. The pandemic caused millions of pet parents to look for new options to fulfill their pet's everyday needs. Some may never return to shopping in brick-and-mortar stores. One reason is that Chewy offers customers automatic delivery of their pet's food and medicine.

Indeed, in its most recent quarter, 69.3% of overall sales were through automatic delivery, or what Chewy calls Autoship. It makes people's lives easier as it is one less thing they need to remember. Chewy even offers a small discount on orders placed through Autoship. The company is piggybacking off the long-run spending moving online from retail locations.

Revenue is growing rapidly, and Chewy is doing it efficiently. Its gross profit margin expanded from 16.6% in 2016 to 25.5% in 2021.   

Investor takeaway 

Roku and Chewy are doing an excellent job capturing their respective markets and solving a problem for their customers. Streaming content costs less, and viewers get liberated from lengthy cable contracts. Chewy gives pet parents the peace of mind to know food and medicine can be delivered automatically. 

The one hesitation investors could have with these two companies is their relatively rich valuations. Putting these stocks on your watch list and waiting for a market correction to buy could minimize that hesitation. 

Parkev Tatevosian owns shares of Chewy, Inc. and Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool recommends Chewy, Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roku Stock Quote
$54.18 (0.50%) $0.27
Chewy, Inc. Stock Quote
Chewy, Inc.
$40.20 (-1.85%) $0.76

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.