For the past year, investors have enjoyed a record-breaking rally. The tech-reliant Nasdaq Composite more than doubled from its lows set during the coronavirus crash, while the widely followed S&P 500 rose more than 75%…
You could rightly say that things have been perfect — perhaps a bit too perfect.
Although it’s undeniable that growth in operating earnings pushes the broader market higher over time, it’s equally true that stock market crashes are a natural part of the investing cycle. Right now, there are a growing number of clues that suggest a stock market crash may be near.
While that might be concerning to short-term traders, a crash or correction is an opportune time for long-term investors to put their money to work in the world’s greatest wealth creator. If a stock market crash were to arise, the following three stocks would make for perfect buys.
One of the smartest ways to preserve capital and grow your wealth during a stock market crash is to seek out defensive sectors and industries. But just because you’re buying a defensive stock, it doesn’t mean it has to be boring.
Most utility stocks are exactly that: boring. They usually offer steady cash flow, a reasonable dividend, and a low-single-digit growth rate. But electric utility stock NextEra Energy (NYSE:NEE) isn’t your typical utility.
Its differentiation comes from its hefty investments in renewable energy. No utility in the country generates more capacity from wind or solar power than NextEra, and it’s liable to stay that way, with the company investing between $50 billion and $55 billion on infrastructure (mostly renewable energy) between 2020 and 2022.
Though green-energy projects are costly, they’re also worthwhile in many ways. Jumping on the wind and solar bandwagon will put NextEra ahead of what seems like inevitable legislation out of Washington to move utilities away from fossil fuels. It also substantially lowers the company’s generation costs, which has resulted in a compound annual growth rate in the high single digits for more than a decade. And it certainly doesn’t hurt that historically low lending rates are making it cheaper for NextEra to finance solar and wind projects.
Aside from the rapid earnings growth associated with renewable energy, NextEra also benefits from the stability of its regulated utilities. It may not be able to pass along price hikes without the blessing of state-level public utility commissions, but it also isn’t exposed to the wild vacillations in price that can occur on wholesale markets.
This unique operating model in an otherwise boring sector would be perfect to buy if the market crashes.
On the surface, marijuana stocks might not sound like a great way to play a stock market crash. After all, most were pummeled alongside the broader market in February-March 2020. But there’s a lot more we know about the cannabis industry now than we did a year ago, and that’s why U.S. multistate operator Cresco Labs (OTC:CRLBF) would make a perfect buy.
Perhaps the first point to make is that we learned…
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