The recent market sell-off has put some investors on the lookout for a prolonged downturn. This article looks at some stocks to buy for a market crash.
After a great first quarter, stocks have come crashing down to start the second quarter. Many analysts see this as the beginning of a prolonged drop in stocks based on unsupported valuations, macroeconomic indicators and geopolitical concerns.
But this doesn’t mean you have to stay out of equities altogether. In fact, many experts say this is one of the best stock picker’s markets in recent years. It can be tempting to look at a particular rally and think this time it’s different. For example, at the beginning of the year, investors were buying into the idea of a soft landing with as many as six interest rate cuts in 2024.
That would have flown in the face of historical norms. This sell-off is a good reminder that the market may allow some deviations from the norm, but the fundamentals will always matter.
In the midst of a sell-off, it bears repeating that when it comes to finding stocks to buy for a market crash, the best offense can be to play good defense. That starts with looking at preservation over momentum. And that brings to mind high-yield dividend payers in sectors of that market that provide must-have products.
Energy Select Sector SPDR Fund (XLE)
Energy stocks are cyclical stocks that fluctuate with underlying energy prices. Not surprisingly, they have been among the best performers, with oil and gas stocks leading the way. The Energy Select Sector SPDR Fund (NYSEARCA:XLE) is an efficient way to get exposure to the entire sector without picking any single stock.
Oil prices are expected to continue to rise regardless of what happens in the Middle East. And even with a floor of around $80, the companies within this ETF will likely post higher profits that will boost the fund’s performance.
Plus, rising energy prices can make the holdings in the ETF a hedge against inflation. Plus, many of these companies are known for paying reliable, growing dividends. And the XLE ETF has a 3.09% dividend yield.
The fund is up 12.5% in 2024 and 3% in the 30 days ending April 19. It has $40.7 billion of assets under management and a low expense ratio of just 0.09%.
Philip Morris (PM)
In the current regulatory environment, many sin stocks have fallen out of favor. However, in a stock picker’s market, you have to look for growth where you can get it. That’s why Philip Morris (NYSE:PM) looks attractive.
As one of the world’s largest cigarette and smoke-free product manufacturers, Philip Morris has a reliable revenue base. That was on display in 2023 when the company generated revenue growth of 11%. The problem was a bottom line that only grew by 1%.
But analysts are forecasting high single-digit earnings growth for Philip Morris, which may translate into a 12% rise in PM stock. Plus, the company’s high-yield dividend stands out at a time when fixed-income investments are coming back into favor. The 5.55% dividend yield is above that of the 2-year Treasury note. The combination of that dividend yield and a rising stock price makes Philip Morris one of the intriguing stocks to buy for a market crash.
Intuitive Machines (LUNR)
If you’re willing to shoot for the stars, Intuitive Machines (NASDAQ:LUNR) could be on your list of stocks to buy for a market crash. Admittedly, this is no defensive stock, but the company is a vital player in the emerging space economy. The company’s technology was showcased in NASA’s Artemis project, which put an unmanned spacecraft on the surface of the moon.
The company is heavily reliant on NASA for its business, which could create problems because, even though this is specialized equipment, the company has competitors in this space.
Nevertheless, the company’s revenue is growing, its losses are narrowing and it trades at an attractive price-to-earnings (P/E) ratio of just 2.4x. Four analysts gave it a Strong Buy rating. Those same analysts set a consensus price target 135% higher than the stock’s closing price on April 19.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.