It’s always wise to be prepared for a stock market crash. A sharp 20% downturn in share prices can be a once-in-a-decade chance to buy shares in quality companies at dirt cheap prices.
These opportunities don’t come around often and they are notoriously hard to predict. So I’m making a list now of stocks to buy if things turn downwards in 2024.
InterContinental Hotels Group
Top of my list is InterContinental Hotels Group (LSE:IHG). The FTSE 100 company has a lot of the characteristics I look for in a stock to buy, but the market knows it and is pricing it accordingly.
IHG operates on a franchise model, which gives it some protection from the effects of inflation. It also means the business can grow without having to invest significantly in order to do so.
This manifests itself in the firm’s cash flow statement. Capital expenditures account for around 5% of the cash it generates with the rest available to fund dividends, buybacks, and balance sheet improvements.
With this type of business, there’s always a risk of cyclicality. Travel demand tends to fluctuate and there’s a chance earnings could be about to fall if a recession starts to weigh on household budgets.
The possibility that earnings per share are at a cyclical high point is enough to make me hold off buying the stock at today’s prices. But it’s top of my list if a stock market crash causes the price to drop.
Bunzl
Another FTSE 100 stock I’d love to buy at a knock down price is Bunzl (LSE:BNZL). The business looks like a compounding machine to me, having achieved earnings growth of 8.5% per year over the last decade.
Bunzl’s prospects for keeping this going look pretty good to me. The firm has a number of acquisition targets available and a solid record of avoiding overpaying for deals.
The trouble is, none of this is a secret and the share price currently reflects this. A price-to-earnings (P/E) ratio of around 21 means the stock looks like it’s close to fair value, in my view.
Investors should also note that the company has increased its share count over the last 10 years. While this has been minimal, if it increases over time, it could significantly offset the firm’s impressive revenue growth.
This is the biggest risk with Bunzl shares and it’s why I’m not buying the stock right now. Offset this with a big drop in the share price, though, and I’d expect to be on it.
Opportunities
A stock market crash in 2024 looks entirely possible to me. Investors seem optimistic about inflation and interest rates and I think there could be significant consequences for share prices if anything disrupts this.
As Charlie Munger said, opportunities present themselves to the prepared mind. And by identifying the shares I’d like to buy if stocks fall sharply, I’m hoping to be able to make the most of any chances I get.
