The TSX has reversed steam since mid-July. Speculation for 2022 has turned more positive, but the outlook for 2023 is still the same – a recession could be on the way. It is difficult to predict the impact that the recession could have on the stock market. We could see a slow slide, which could take months to recover.
Or there could be a big drop, like in 2020. And if that happens, investors will have the opportunity to buy their favorite companies at discounted prices. I have already set three goals in case the market crashes.
A leader in insurance
Leaders in their respective industries, especially if the industries/companies themselves are relevant over time and don’t expect any drastic changes in the near future, are healthy long-term holdings. And that’s just one of the reasons why Intact Financial (TSX: IFC) is such a coveted stock. It is a Canadian leader in property and casualty insurance, with a growing market presence in the UK, Ireland and the US.
Looking at the stock’s performance over the past decade, especially against life insurance giants like Manulife, it’s easily one of the best choices in the insurance industry. It’s a consistent cultivator that has returned over 184% over the past decade through price appreciation alone, and it also offers a healthy dividend at a modest yield (2.2% now).
A stock market crash would be the perfect time to buy that great growth stock that is discounted and possibly undervalued and, at the same time, lock in a much more attractive yield than the current one.
The banking giant
Not only is Royal Bank of Canada (TSX:RY)(NYSE:RY) the undisputed industry leader by market capitalization and several other areas, but it has also been one of the two best performing stocks in banking over the past decade. And the growth potential also comes with a healthy yield of 4.13%, which could reach an even more attractive figure during a stock market crash.
The stock is sufficiently discounted (16.8%) and valued at fair value, and a stock market crash could result in a much larger discount on the stock. This will provide decent short-term growth (when the stock recovers) and add to long-term return potential. Higher yield and lower valuation will also pair favorably with existing stake, adjusting the numbers to more attractive levels.
A stock of gold
Franco-Nevada (TSX:FNV)(NYSE:FNV) is a giant in the gold royalty and streaming industry. It has an impressive portfolio of over 400 gold projects, 112 of which are already in the production phase. And with 250 exploration projects (most of which could turn into healthy gold producers), the company’s future cash flow looks promising.
More than half of the portfolio is solely focused on gold and another significant part on other precious metals. Geographically, the portfolio leans quite heavily on the Americas.
Thanks to the royalty-based business model, Franco-Nevada is not as vulnerable to price fluctuations as gold miners, which is reflected in its price performance. He’s also a dividend aristocrat (meaning he’s been increasing his dividend consistently for at least five years), although the yield is usually too low; that’s just one reason to buy it during a stock market crash. The other reason is the potential that gold stocks offer in times of recession.
All three stocks can offer decent returns during the recovery phase after the stock market crash. But it might not compare to more volatile stocks. The main reason to buy these three on a crash is the long-term return potential. Higher yield, lower value, and reduced price can have a significant impact on a company’s overall return potential.