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4 stocks I’d buy if we see a stock market crash in 2022

Risk reward ratio / risk management concept

We’re now only a few days away from cheering in the New Year. Yet just because we like to mentally start afresh and turn a page, doesn’t mean we can. The stock market carries over everything from 2021. With wobbles being seen last week in the market, I think that there are valid concerns for Q1 2022 around a potential stock market crash. If one happens, here are a few of the stock that I’ll be buying at cheaper prices.

Scooping up potential bargains

I imagine that concerns around Covid-19 disruption will be the main driver behind any potential stock market crash. With that in mind, I have a fair idea of the companies that could be hardest hit: airline stocks like IAG, engine manufacturers like Rolls-Royce and luxury brands such as Burberry.

A key point here is that most of these stocks (with the exception of Burberry) have struggled to receiver from the previous crash in 2020. This means that another crash would possibly push some to such low levels that they could become bargain buys.

I’ve steered clear of IAG shares this year as the price has fallen by 17%. Yet I would consider buying if a stock market crash pushed the price down by another 10%-20% and below 100p. Fundamentally, I’m trying to have a long-term view here. As long as I don’t think the company will go bust, I feel the share price should be higher when looking out several years.

If I want to take slightly less risk, then buying a stock like Burberry could be a good option. It has a strong online presence, which should help to offset lost revenue from store closures. 

Thinking about retaining value

Another angle I’m considering is looking less at stocks that could fall and more at those that could hold value better. For example, Kingfisher. The DIY retailer performed well during 2020, despite the stock market crash. Revenue actually rose, as people at home spent more time fixing things and starting DIY projects.

If any crash in 2022 is lockdown-related, then I think Kingfisher could be a good buy. Even if the crash isn’t related to Covid-19, I wouldn’t mind holding it in my portfolio. The products sold are essential goods, so I don’t envisage a period anytime soon when hammers and screws go out of fashion!

Other stock market crash options

Finally, it’s worth me thinking about other causes of a market crash. This is tough because one of the elements associated with a crash is surprise. If they knew what was coming, people wouldn’t suddenly be rushing to sell stocks. However, a potential cause could be around the political situation. The resignation of the Prime Minister or another upheaval in government could make waves. Or we could see problems with China really blow up next year.

In these scenarios, I would need to be reactive and understand the situation at the time before making a call. Ultimately, whatever the reason for a crash, I can use it to my advantage to find long-term value in stocks that have been oversold in the near term.

The post 4 stocks I’d buy if we see a stock market crash in 2022 appeared first on The Motley Fool UK.

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Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Burberry. 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.