3 stocks to reload when the stock market sells
Volatility has returned to the stock market in recent weeks, pushing the S&P 500 down more than 5% below its all-time high at any given time. While not a massive sell-off, it is the biggest drop in almost a year.
Bumps in the road like this are always a good reminder that massive sales can happen out of nowhere, which is why investors need to be prepared. One way to do this is to make a list of stocks that you would like to buy the next time the market plunges.
With that in mind, we asked three Fool.com contributors which stocks they think investors should consider getting into during the next massive sell-off. At the top of their lists were Brookfield Renewable Partners’ (NYSE: BEP), Waste Management (NYSE: WM), and Nucor (NYSE: NUE).
Brewer Ruben Gregg (Brookfield Renewable Energy Partners): When markets began to collapse in 2020, units at Brookfield Renewable Partners fell about 45%. Theyh quickly began to gain ground, reaching a new high in early 2021 before starting to fall again. The stock is down around 25% from that high, but still looks historically expensive. If there is a massive sell off in the market, there is probably still room to drop even after the current drop.
But there’s a lot to love about Brookfield Renewable Partners, a master limited partnership, and its younger twin, corporate stocks. Brookfield Renewable Corp. (NYSE: BEPC). About 50% of its income comes from very stable hydroelectric power. The rest is a mix of newer technologies, like solar and wind power. Simply put, it’s about using the hydropower foundation to expand into new areas. It is an excellent portfolio balance that sets Brookfield Renewable apart from its peers.
Then there is the dividend. The return today is historically modest at around 3.2%, but the payout has been increased every year for a decade (adjusting for the Brookfield Renewable Corp spin-off and a 3-for-2 stock split, all of which have two took place in 2020). The annualized rate of increase over this period is a solid 6%. And management believes the growth can support 5-9% distribution growth for the foreseeable future. If the stocks sold, thereby increasing the yield, this would be a great way for income investors to add renewable energy to their portfolios. A 6% yield would be pretty incredible, but anything above 5% would probably be a good entry point given the potential for growth in the renewable energy space today.
An excellent stock of diving in the dumpsters
Matt DiLallo (Waste Management): Market sell-offs are often great opportunities for long-term investors. During a stock market panic, investors will often sell high quality companies to raise cash to cover a margin call or reduce their exposure to the stock market. Because of this, investors with cash to spare can get high quality stocks that others throw away.
Waste management is a great stock to consider loading during the next market downturn. The collection and recycling business operates a very stable business. As a result, it generates a lot of money. This gives him the money to pay dividends, buy back shares, and make acquisitions, all of which help create shareholder value. For example, it generated over $ 1 billion in cash from operations in the second quarter alone, thanks to its Advanced Disposal acquisition and a recovering economy from the early days of the pandemic. This has led the company to increase its stock buyback outlook in 2021 until it is fully authorized by $ 1.35 billion.
Based on its success, Waste Management’s stock has rallied to the market over the past year, jumping over 30%, slightly exceeding the S&P 500. For this reason, it is currently trading at a relatively high level of 30 times futures earnings. In addition, his dividend yield is at a 10-year low of 1.5%.
Considering these numbers, it’s not a good deal at the moment. However, if the market sells, investors can take the opportunity to stock up on stocks of a high-quality company that others are throwing aside.
Look for solid stocks that the market is overlooking
Neha Chamaria (Nucor): A market selloff is often the perfect time to buy cyclical stocks that are taking a hard hit but have clear growth catalysts ahead. Nucor, for example, is the largest steel and steel products company in the United States, which means its fortunes are closely tied to the health of the economy. However, abnormal stock market crashes like the one we saw in September can push stocks down. If this happens again, you might want to take a serious look at Nucor.
For starters, Nucor is poised to benefit from any increase in US construction spending given its unrivaled footprint in the steel industry. Steel is an essential raw material for almost all types of construction. While an infrastructure bill under the Biden administration could be an important catalyst for growth, whatever local and federal government spending is right now, Nucor’s fund is already ringing. another quarter bumper.
Meanwhile, a drop in the Nucor share price also means that you can buy shares of a company that has increased its dividends for 48 consecutive years and will therefore send you regular dividend checks even within a year. hard. It’s an attractive proposition, and buying Nucor shares when the market crashes will mean you are buying one of the best infrastructure stocks in the long run.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.