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If a stock market sell-off is coming, these are my best shares to buy!

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Snapping up quality stocks when they go on sale is easy to say when times are good but frustratingly hard to do when the proverbial actually hits the fan. That’s why I always keep a list of the best shares to buy when the opportunity comes knocking.

With the FTSE 100 and FTSE 250 both now down year-to-date, I’ve been dusting off that list in recent days.

Anxious times

Now, don’t get me wrong: I’m not saying that a big sell-off is now an inevitability. No one has any idea whether the recent dip in sentiment will last or get worse.

Nevertheless, it’s not hard to imagine what could lead to a more sustained dip in share prices.

The fact that average weekly earnings rose 7.8% year on year in the three months to June is an ominous sign. The City had been expecting this to come in at 7.3%, down from the 7.5% hit a month earlier.

The problem is that makes it more likely that the Bank of England is forced to raise interest rates again. That’s bad news if you’re a borrower. Cue more penny-pinching and fresh chatter about an impending recession.

Generally, markets tend not to like such talk. A long-term investor, however, I can afford to be more sanguine.

Why? Because this pessimism will likely push the share prices of our best companies lower.

What do I mean by ‘best’?

Naturally, ‘best’ is subjective. If it wasn’t, there wouldn’t be much of a market in the first place.

One also needs to be wary of becoming fixated on any one sector, something that many tech investors discovered in 2022. Staying diversified offers a degree of protection against this.

Still, I know what I’m generally looking for: companies with long records of compounding in value and rewarding investors.

I’d also make a point of only selecting firms with sound balance sheets and solid cash flow.

While dividends aren’t essential, they’re nice to have (especially if they get hiked most years by management).

On my buy list

From the FTSE 100, I’d get stuck into buying slices of companies like Diageo. This blue-chip behemoth boasts a big portfolio of coveted brands that sell in all economic conditions. So, even if its share price fell, I’d be confident that actual trading would remain robust.

Property portal Rightmove is another candidate. Yes, the near-term outlook isn’t pretty for the housing market. But a big dip in the share price would allow me to swoop in and buy this incredibly profitable business before sentiment (inevitably) recovers.

From the FTSE 250, I’d consider increasing my stake in Games Workshop due to its wonderful performance over the years and its leading position in a niche space.

As volatile as they can be, I wouldn’t dismiss small-cap stocks either. I’ve had my eye on biotech firm Bioventix for years thanks to its sky-high margins.

All of the above score well on the ‘quality’ criteria mentioned earlier.

No sure thing

Of course, there’s a chance that this latest wobble won’t last for long.

But considering all eventualities and being ready to pounce when the chips are down feels inherently Foolish, particularly as fortunes can and have been made from a single market crash.

I’ve got my plan. Have you?

The post If a stock market sell-off is coming, these are my best shares to buy! appeared first on The Motley Fool UK.

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More reading

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Paul Summers owns shares in Games Workshop Group plc. The Motley Fool UK has recommended Bioventix Plc, Diageo Plc, Games Workshop Group Plc, and Rightmove Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.