After a brief stock market correction in February caught investors by surprise, the announcement of new steel tariffs has sent stocks plunging again.
The Dow dove over 400 points on Thursday (March 1) and continued its decline on Friday (March 2).
While we aren’t in correction territory, the recent volatility underscores the need for a stock market crash insurance plan for every investor.
Now, we aren’t predicting a stock market crash, but we also don’t want our Members caught flat-footed if stocks tumble even more. The nine-year-long bull market, the second-longest in history, has made some investors complacent.
Market corrections and pullbacks are normal parts of the stock market’s cycle. Prepared investors will fare much better during the next one.
And here’s the good news. Money Morning is preparing investors by sharing stock market crash protection strategies with our readers.
In fact, you can even profit as the markets fall…
How to Profit When Stocks Fall
If you’re anticipating stocks will fall, then this strategy will help you profit.
Money Morning Chief Investment Strategist Keith Fitz-Gerald says investors can place a small – less than 5% – portion of their portfolio in Rydex Inverse S&P 500 Strategy Fund (MUTF: RYURX).
Holding RYURX gives you the same benefit of shorting the S&P 500 index, but without the risk associated with shorting equities.
RYURX goes up when the market goes down. During February’s correction, it rose 10%. That’s like having an insurance plan for a stock market correction and will help boost your portfolio as other stock prices are dropping.
While there is risk associated with RYURX, the losses are capped at your initial investment, rather than the unlimited losses that shorting a stock could bring.
That also means RYURX isn’t a “buy-and-hold” stock, but one that should only be strategically used when you’re anticipating a correction or pullback. If the stock market continues to gain, RYURX will lose value.
And while shorting the overall market can help buoy your portfolio during downturns or a 2018 market crash, owning some of the most resilient stocks on the market is another way to protect your money.
The two stocks we’re about to show you have double-digit profit potential over the next year and proved resilient during past market crashes.
By owning well-managed companies in must-have industries, you can protect your portfolio from the fallout of a market crash…
2 Stocks to Own During a Market Crash
The two stocks we’re recommending today have a track record of outperformance even as the broader market declines. Both of these stocks brought positive returns during the tech crash in 2000, even as the overall markets fell more than 10%.
While there’s no guarantee these stocks will be immune from the next correction or pullback, they are some of the best companies in the most in-demand industries.
Money Morning Chief Investment Strategist Keith Fitz-Gerald thinks investors should hold on to stocks in the “Unstoppable Trends.” The trick to making huge profits is to find “must-have” companies that fall into these six “Unstoppable Trends”: medicine, technology, demographics, scarcity and allocation, energy, and war, terrorism, and ugliness (also known as “defense”). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Federal Reserve cannot meddle with, and Wall Street cannot hijack.
By owning well-run companies in these Unstoppable Trends, you’ll own resilient stocks that will charge out of any market downturn, leaving behind anyone who sold off stocks for other assets. And if the market doesn’t correct, these stocks are still going up.
That’s why we’re bringing you two of our favorite stocks from the Unstoppable Trends.
Raytheon Co. (NYSE: RTN) is our play for the trend of war, terrorism, and ugliness.
Raytheon is a leader in the defense industry, with billions in contracts with the U.S. government and other countries across the world. That means if the market falls, Raytheon is going to continue to excel over the long term.
Raytheon has billion-dollar contracts with the U.S. government, but it also has a diverse customer base. International customers make up just under half of its business. That means even if a few countries cut defense spending during an economic downturn, RTN still has plenty of other customers to help it weather the storm.
But RTN’s real allure as an Unstoppable Trend pick is the fact that war is a reality of the world. For instance, as tensions rise abroad, the United States is more likely to need more weapons and equipment. When the United States launched a missile strike on a Syrian airbase on April 7, Raytheon’s stock jumped more than 2%, since its missiles were used.
RTN currently trades at $210.97 a share and pays a 1.51% dividend yield. Plus, investment banks are giving RTN one-year price targets as high as $265 a share. That’s a potential gain of 25%.
Becton, Dickinson and Co. (NYSE: BDX) is an example of a play in the Unstoppable Trend of demographics.
BDX is a healthcare company specializing in one-time use medical products utilized in hospitals and long-term care facilities. That means as populations age, more people will need this type of medical care, and BDX will be in even higher demand. People will need healthcare whether the market falls or not.
But BDX is also an exceptionally well-managed company. It has a 10.54% profit margin and maintains a 1.58% dividend yield, even after a $12.2 billion takeover of CareFusion two years ago. That means the company’s capital management is sustainable and will easily survive a market downturn. And that’s good news for its shareholders during a stock market crash.
BDX trades at $217.40 and pays a 1.37% dividend yield. Wall Street analysts are also giving BDX a 12-month price target of $265, a 22% gain from today’s prices.
Source: Money Morning