The best investors all agree that the way to handle a stock market crash is to be prepared. And this involves having a list of shares to buy ready for when the opportunity presents itself.
I think this is a great idea – there are a number of stocks I’d love to buy if share prices suddenly collapsed. Here are two FTSE 100 shares from my list.
Halma
Top of my list is Halma (LSE:HLMA). Despite the fact that I like this business a lot and think it has some great fundamentals, I sold my shares in the company recently.
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Halma is a conglomerate – a collection of smaller businesses – focused on three key areas. These are: industrial safety, environmental monitoring, and life sciences.
The company attempts to grow in two ways. The first is by acquiring promising businesses and the second is by improving its operations.
In my view, Halma’s management has done a great job. Revenue has grown at an average of 9% annually for the last 10 years and earnings per share have increased by around 10% per year.
So why did I sell my shares? The short answer is I thought the price had got too high and I had better opportunities for the money I had invested in the company.
I bought my shares when the stock fell during the uncertainty around the UK’s mini-budget. Since then, though the share price has climbed significantly.
At today’s prices, I think the price-to-earnings (P/E) ratio of 41 as a significant risk going forward. So I’m not buying the stock today, but I’m ready to seize an opportunity if it comes.
Diageo
Diageo (LSE:DGE) also makes my list. The drinks manufacturer is a good company in a great sector and I’d be pleased to buy the stock at a decent price.
The attraction of the stock is clear enough. Diageo has terrific intangible assets, with a number of category-leading products and its huge scale allow it to overpower the competition.
The trouble is, all of this is pretty well-known. And as a result, this tends to be reflected in the company’s price tag when it comes to shares.
At a P/E ratio of 23, the stock has a much less optimistic valuation than Halma. But it also has much less impressive growth figures.
Revenue growth at Diageo comes in at 3% per year over the last decade and earnings per share growth was just under 4%. To my mind, that’s not particularly impressive given the share price.
Furthermore, I don’t see that growth accelerating rapidly in the near future. So I view Diageo as an investment opportunity for a time when FTSE 100 share prices are lower than they are now.
FTSE 100 stocks to buy
Warren Buffett, Charlie Munger, and Sir John Templeton all say that opportunities present themselves to those who are prepared. So I’ve been looking for FTSE 100 stocks to buy.
Both Halma and Diageo have sound balance sheets and strong returns on invested capital. In both cases, though, the stocks are priced to reflect this – and more, in my view.
I don’t know when the next stock market crash is coming. But I’m making my list of shares to buy now so I’m ready when it does.
