If you weren’t sure you had the fortitude to be a long-term investor, 2020 has answered that question. The benchmark S&P 500 lost more than a third of its value in roughly one month, then recouped everything it lost (and then some) in the subsequent five-month period. Volatility has been far above historic norms this year — and it may not be over just yet.
This past week, investors were given a stark reminder that stocks can and do go down. Stock market crashes and corrections are far more common than most investors realize, with 10% moves lower in the S&P 500 occurring, on average, every 1.84 years since 1950.
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But there’s good news. Every single stock market crash in history has proved to be an opportunity for long-term investors to buy into great companies at a perceived discount. Although we’re never going to know beforehand when a crash will occur, how long it’ll take to hit bottom, or what that bottom number might be, we know that the broader market eventually erases all crashes and corrections.
The $64,000 question is, “What to buy if a stock market crash occurs?”
While it’s impossible to perfectly shield your portfolio from downside given that crashes and corrections are natural parts of the economic cycle, there are a handful of virtually flawless stocks you should consider buying during notable market weakness. The next time the stock market crashes, buy these four stocks.
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Intuitive Surgical
First up is surgical system device maker Intuitive Surgical (NASDAQ:ISRG). Healthcare stocks are highly defensive and rarely take direct hits during recessions. Since we can’t fully control when or how we get sick, drug and device makers stay busy no matter how the U.S. economy is performing.
Intuitive is special because of its insurmountable competitive edge. It’s installed 5,865 of its da Vinci surgical systems over the past 20 years — far more than all of its competitors combined. Over that time, Intuitive Surgical has built up priceless rapport with hospitals and surgical centers that are unlikely to switch to a competitor given the cost of the da Vinci system ($0.5 million to $2.5 million).
What’s more, Intuitive Surgical is designed to become a more efficient business over time. In the 2000s, the company derived most of its revenue from selling its pricey da Vinci system. Since these systems are expensive to build, Intuitive Surgical didn’t net great margins from them. Over the past decade, the company’s higher-margin segments — instruments, accessories, and servicing — have picked up. As more systems are installed worldwide, these higher-margin segments will play a larger role in total sales.
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Square
Another virtually flawless company to scoop up during a stock market…
Read more:4 Virtually Flawless Stocks to Buy if the Market Crashes | The Motley Fool
