Stock market crash: 3 shares I’ve added to my watchlist today

As the FTSE 100 tumbles on virus fears, Harshil Patel considers what he’d do in a stock market crash and the stocks he’d like to buy.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Occasionally the FTSE 100 and other major indices endure a stock market crash. And there are fears that another one is looming. There’s alarm about a new Covid variant detected in South Africa. At the time of writing, global stock markets are falling and there’s a sense that any more bad news could lead to a crash.

The UK imposed travel restrictions on six African countries over the new variant. In particular, travel and leisure stocks were hit hard this morning. For example, easyJet shares were trading 14% lower.

What to do in a stock market crash?

The natural instinct in a stock market crash is to panic. But as a long-term investor, I try to sit back and analyse the facts and the potential effects on my portfolio. It’s important that I try to keep a clear head.

What does that mean? Well, I’d need to remind myself why I own a particular share and if the recent concerns could be temporary. If I think the worries will soon pass, a stock market tumble could be an opportunity to buy quality shares at a discount.

I love a discount. Especially when it comes to shares. In times like this I like to have a stock watchlist ready. The list includes high-quality shares that I’d like to own for the long term. In a market tumble, even shares that are unrelated to recent concerns can take a hit. This can provide excellent opportunities, in my opinion.

Stock watchlist

So what’s on my watchlist and which shares should I avoid? Well, I’m avoiding any travel shares right now. The sector is too precarious, at the moment. It’s too vulnerable to new variants and government restrictions that can change at short notice.

On my watchlist, I’ve added three quality shares with strong brands. These are resilient companies with defensive characteristics. My picks are Diageo, Relx and Yougov.

Each offers a return on capital employed of at least 15%. I like this measure of quality. It’s also a strategy used by popular investor Terry Smith. All three are profitable and have double-digit profit margins. Looking to the future, analysts expect double-digit earnings growth for all three companies. This is encouraging and I like what I see.

Diageo, Relx and Yougov have demonstrated great resilience throughout the pandemic. I’d love to add these shares to my Stocks and Shares ISA if share prices fall further.

More weakness to come?

There are some things to bear in mind, however. A stock market crash doesn’t always end in one day. There are several reasons why share prices could tumble further. The new variant could spread globally and be more resistant to current vaccines. Further government restrictions could delay the economic recovery. There are still questions regarding the new variant and until there are clearer answers, uncertainty could cause stock markets to remain weaker in the short term, even for strong companies.

Overall, despite short-term concerns, the long-term history of the stock market is encouraging. And if the stock market crash gets deeper, I’m ready with my watchlist.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harshil Patel owns shares of YouGov. The Motley Fool UK has recommended Diageo and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »