History has repeatedly shown that market crashes are almost a “natural” part of the investing cycle. On July 19, the S&P 500 saw its worst single-session plunge in months, fueling speculation that a major correction might be around the corner — and that will provide stocks to buy. The spread of the delta variant, which could threaten the reopening of the global economy, further reinforces such speculation among investors.
Since then, broader markets have recovered their losses. However, volatility has also increased. In the past seven decades, there have been about three dozens of double-digit percentage declines in the benchmark S&P 500. It is only a matter of time that we might see another sizeable pullback in the market. Therefore today, I’d like to discuss stocks to buy after a potential market crash.
If you’re a savvy long-term investor, a stock market crash is the perfect time to go searching for stocks to buy. Investors who buy high-quality companies when they plunge during a crash have a great chance to generate lucrative returns and build significant wealth. That’s because each crash has eventually been followed by a bull-market rally.
With that information, here are seven no-brainer stocks to buy after the market crash.
- Chipotle Mexican Grill (NYSE:CMG)
- Citigroup (NYSE:C)
- Direxion NASDAQ-100 Equal Weighted Index Shares ETF (NYSEARCA:QQQE)
- Harley-Davidson (NYSE:HOG)
- Intel (NASDAQ:INTC)
- RH (NYSE:RH)
- Snowflake (NYSE:SNOW)
Now, let’s dive in and take a closer look at each one.
Stocks to Buy: Chipotle Mexican Grill (CMG)
Newport Beach, California-based Chipotle Mexican Grill operates Chipotle Mexican Grill restaurants, serving a menu of burritos, tacos, burrito bowls, and salads.
Chipotle released second-quarter results in mid-July. Revenue increased 38.7% year-over-year (YOY) to $1.9 billion. Net income was $188 million, up from $8.2 million. Adjusted diluted earnings per share (EPS) stood at $7.46, surging from 40 cents in the prior-year quarter.
CEO Brian Niccol cited, “We remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volumes with industry-leading returns on invested capital that improve as we continue to add Chipotlanes.”
The Tex-Mex chain has become one of the top restaurant stocks to own in recent years. It seems like the pandemic further boosted the company’s competitive positioning in the industry. Orders via digital channels that include its website, mobile app, and third-party delivery services, accounted for almost half of total sales. Its rewards program currently boasts 23 million members.
CMG stock recently hit its all-time-high (ATH) of $1,840 on July 26. It currently hovers slightly above $1810, up more than 30% year-to-date (YTD). But it trades at a steep valuation at 88 times the last 12 months’ earnings. Forward price-earnings (P/E) and current price-to-sales (P/S) ratios are 75.76 and 7.69, respectively. Investors would find better value around $170-$175.
Citigroup (C)
New York-based global financial giant Citigroup needs little introduction. It offers a wide range of financial products and services, including corporate and investment banking, consumer banking and credit, transaction services, securities brokerage, and wealth management.
Citigroup released Q2 financials on July 14. Citigroup’s end-of-period loans were $677 billion at the end of the quarter, down 1% from the prior-year quarter. Deposits increased 6% to $1.3 trillion. Total revenue stood at $17.5 billion, implying a 12% YOY decline. Net income rose from $1.1 billion in the prior-year quarter to $6.2 billion. Diluted EPS came at $2.85 compared to 38 cents a year ago.
CEO Jane Fraser said, “We ended the quarter with a Common Equity Tier One ratio of 11.9%, and we intend to continue to return our excess capital, over and above the amount we need to make strategic investments”.
Citigroup is planning to use the majority of its excess capital and earnings for share repurchases, which should lead to an increase in its EPS in the coming months. Additionally, Citigroup stock offers a generous dividend yield of over 3%, above its peers such as JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).
Citigroup stock hit its 52-week high of $80 in early June. It currently hovers slightly below $68, up just less than 10% YTD. Shares are currently trading at a multiple of 8.5 times forward earnings and 0.74 times its book value.
Stocks to Buy: Direxion NASDAQ-100 Equal Weighted Index Shares ETF (QQQE)
The Direxion NASDAQ-100 Equal Weighted Index Shares ETF provides equal-weight exposure to all NASDAQ-100 stocks. As a result, investors could potentially see higher returns from companies with a smaller market capitalization (cap). The fund is rebalanced quarterly.
QQQE started trading in March 2012. Net assets stand around $380 million. In terms of sectors, we see information technology (38.36%), followed by healthcare (15.87%) and consumer discretionary (14.1%). The top 10 names make up about 52% of net assets. The weighting of each stock stands around 1%.
The fund returned more than 35% in the past year and 13% YTD. QQQE hit a record high in recent days. Potential investors could buy the dips in the fund.
Harley-Davidson (HOG)
Milwaukee, Wisconsin-based Harley-Davidson is well-known for its motorcycles, as well as motorcycle parts, accessories, general merchandise, and related services.
The company released Q2 results in mid-July. Revenue increased 77% YOY to $1.53 billion. Net income of $219 million translated into adjusted diluted EPS of $1.41, up from an adjusted loss per share of 38 cents a year ago. Cash and equivalents stood at $1.7 billion.
CEO Jochen Zeitz remarked, “I’m pleased with the pace of improvements and with the strong quarter that we have delivered. We are encouraged by the signs of consumer positivity in the market; however, we remain mindful of the significant supply chain challenges that we expect to continue to impact the sector.”
Harley-Davidson announced its five-year strategic plan that aims to improve branding to generate “increased profitability and low double-digit EPS growth through 2025.” The Hardwire Strategic Plan includes increased use of digital marketing, starting used motorcycle sales, and the launch of more electric motorcycles.
The company is focused on diversifying its products into “lifestyle” branding. It continues to add new motorcycle models to its portfolio that appeal to modern consumer preferences. While its LiveWire electric motorcycle brand received positive reviews, its base price tag at $30,000 stands well above its peers in the industry.
Harley-Davidson seems to have a shot at returning to growth thanks to its new strategic direction along with a booming market. Risk-tolerant investors willing to invest in the consumer durables space may consider adding HOG stock to their portfolio. The shares currently hover around $40, up almost 7% YTD. Forward P/E and current P/S ratios are 11.48 and 1.3, respectively.
Stocks to Buy: Intel (INTC)
Santa Clara, California-based Intel is the world’s largest semiconductor chip manufacturer. Intel supplies microprocessors for a wide range of computer system manufacturers. The company also manufactures network interface controllers and integrated circuits, flash memory, motherboard chipsets, embedded processors, and graphics chips.
Intel announced Q2 results in late July. Revenue increased 2% YOY to $18.5 billion. Net income stood at $5.2 billion, representing a 6% YOY increase. EPS came in at $1.28, compared to $1.14 in the prior-year period. During the quarter, the chip giant launched 12 new processors for clients. Investors were also pleased to see that Intel generated $8.7 billion in cash from operations and paid dividends of $1.4 billion.
On the results, CEO Pat Gelsinger cited, “Our second-quarter results show that our momentum is building, our execution is improving, and customers continue to choose us for leadership products.”
INTC stock currently trades slightly below $54. So far this year, it is up almost 8% YTD. INTC stock has a cheap valuation, trading at a P/E ratio of less than 12, well below Taiwan Semiconductor Manufacturing (NYSE:TSM) that sells for 31 times earnings.
While lack of revenue growth over the past few years accounts for its cheap valuation, Intel remains one of the few semiconductor designers that manufacture its own chips. Additionally, massive amounts of business may shift to Intel overnight if geopolitical concerns lead to a decline in TSM’s production capacity. Forward P/E and current P/S ratios are 12.38 and 2.86, respectively.
RH (RH)
Corte Madera, California-based RH is a leading luxury retailer in the home furnishings market. Its products come across several categories, including furniture, home furnishings, lighting, textiles, bathware, outdoor, and garden.
According to the most recent quarterly results, top line grew 78% YOY to $860.8 million. Diluted EPS stood at $4.19, compared to diluted net loss per share of 17 cents. RH ended the quarter with 229.6 million in cash.
CEO Gary Friedman remarked, “We are raising our outlook for revenue growth in fiscal 2021 to a range of 25% to 30% versus our prior outlook of 15% to 20%. As it relates to the second quarter, we expect revenue growth in the range of 35% to 37% and adjusted operating margin in the range of 25.9% to 26.1%.”
RH saw significant sales growth and high earnings compared to its peers in the industry, reporting a 109% increase in order volume in the first quarter. The company is expected to further boost its revenues with new product innovations through 2022.
Management anticipates it can achieve 25% operating margin during favorable market conditions and over 20% profitability in any selling environment. In addition, RH is planning to accelerate its expansion in international markets in 2022.
RH shares currently hover slightly below $660. So far this year, the shares are up almost 50% YTD. RH stock has gained just under 130% in the past 12 months. The stock trades at 30.21 times forward P/E and 6.24 times current sales.
Stocks to Buy: Snowflake (SNOW)
Bozeman, Montana-based Snowflake provides a cloud-based data platform where customers can build data-driven applications, and share data.
The company’s fiscal year ends on January 31. First-quarter revenue stood at $228.9 million, representing a 110% YOY increase. However, despite the top-line growth, the bottom line continued to be in red. Net loss deteriorated to $203.2 million, compared to $93.6 million in the prior-year quarter. Accordingly, diluted loss per share came in at 70 cents. Cash and equivalents ended April at $644.7 million.
On the results, CEO Frank Slootman cited, “Snowflake reported strong Q1 results with triple-digit growth in product revenue, reflecting strength in customer consumption. Remaining performance obligations showed a robust increase YOY, indicating strength in sales across the board.”
Despite a deterioration in the bottom line, market analysts highlight the rapid growth in the company’s revenues during the first quarter. Snowflake currently has 4,532 total customers, and its net revenue retention rate stands at 168%. The company anticipates 88-92% YOY revenue growth in the second quarter. Management also believes product revenue could exceed $10 billion by 2029.
As the company is currently in the early stages of its growth cycle, investors should be patient with SNOW stock. Shares currently hover slightly around $270. So far this year, SNOW stock has fallen almost 5%. The recent pullback represents a valuable buying opportunity for long-term investors. P/S ratio stands at 111.42 times.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.