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As an investor with a significant position in stocks, I’m an optimist. However, it is also important to be realistic. This helps you rebalance your portfolio in response to macroeconomic, geopolitical, and other headwinds. In my view, a potential delay in rate cuts is likely to spook markets, as it could signal a hard landing for the economy. Therefore, I look at stocks to buy in case of a market crash.
However, I must add that I expect the first round of cuts to occur before the presidential election. So there are two strategies I’m considering for the next few quarters. First, he buys blue-chip stocks with low beta, which protects the portfolio from capital erosion if there is a 10% to 15% correction in the index.
Additionally, if the overall market actually declines in the coming months, consider buying blue-chip growth stocks. I expect a strong recovery in the market towards the end of the year. Here are three stocks to buy in case of a market crash.
Newmont Corporation (NEM)
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Gold has fallen from its highs as tensions ease in the Middle East. However, I remain bullish on precious metals with expansionary policy planned for later this year. Newmont Co., Ltd. (New York Stock Exchange:Nemu) is a blue-chip gold miner worth considering at the current $37.5 level.
It is worth noting that NEM stock has a forward price/earnings ratio (P/E) of 17.7 times. With an investment-grade balance sheet and high-quality assets, this gold miner trades at a valuation gap. Additionally, the low beta stock offers an attractive dividend yield of 2.56%.
As an overview, Newmont has gold reserves of 128 million ounces. In addition, the company owns his 155 million ounce gold resource. High-quality Tier 1 assets give the company a clear picture of production beyond its current decade.
From a financial perspective, Newmont reported adjusted EBITDA of $4.2 billion last year. As the realized price of gold increases, EBITDA and cash flow can grow. This provides flexibility for dividends and aggressive exploration investments.
Merck (MRK)
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Merck (New York Stock Exchange:M.R.K.) is also a low-beta, blue-chip stock trading at an attractive valuation. At a forward price/earnings ratio (PER) of 14.8x, the downside for MRK stock appears to be limited. Furthermore, the upside potential is significant given the company’s growth prospects.
The first thing to note is that Merck has a rich pipeline. Currently, 10 programs are under consideration, 30 in Phase 3 and 80 in Phase 2. Steady growth will be ensured as new molecular entities are commercialized in the coming years.
Last year, Merck reported sales of $60.1 billion, up 1% from the previous year. Growth this year is expected to accelerate in the range of 4% to 7%. This leads to increased revenue and cash flow. Additionally, the company expects to maintain healthy growth backed by its oncology, cardiometabolic and immunology pipelines.
Pharmaceutical stocks have generally been underperforming post-pandemic. Now is a good time to consider exposure to a quality brand like Merck.
Lockheed Martin (LMT)
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Global defense spending in 2023 will increase by 6.8% from the previous year to $2.44 trillion. Spending is likely to continue increasing at a healthy pace amid rising geopolitical tensions. lockheed martin (New York Stock Exchange:LMT) stocks are an attractive option among defensive stocks.
LMT stock trades at an attractive forward price/earnings ratio of 17.7x and has a dividend yield of 2.72%. Additionally, low-beta stocks have been flat over the past 12 months. With positive tailwinds in the industry, I expect an upward breakout.
It is also worth mentioning that global defense spending is not affected by these factors, be it inflation or recession. Therefore, Lockheed Martin has a healthy $160.6 billion backlog and is well positioned to grow. The company expects free cash flow to be $6.2 billion for the current fiscal year. This provides flexibility in dividends and investments in next-generation defense technologies. If a market crash occurs, make sure you have this stock in your portfolio.
On the date of publication, Faisal Humayun did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in credit research, equity research, and financial modeling. Faisal has written over 1,500 stock-specific articles, focusing on the technology, energy and commodity sectors.
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