3 Stocks to Buy Hand Over Fist if There’s a Stock Market Crash

For investors, things just about couldn’t be better. The benchmark S&P 500 (SNPINDEX:^GSPC) has more than doubled since hitting its coronavirus pandemic low on March 23, 2020, and it’s, thus far, gone the entirety of 2021 without so much as a 5% correction.

Unfortunately, a number of historical metrics would suggest that this rally isn’t sustainable, and that a stock market crash or sizable correction could be on the way.

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History may prove unkind to the stock market in the near term

For example, even though the internet has democratized trading and helped to expand price-to-earnings multiples over time, the current valuation multiple for the S&P 500 is nothing short of worrisome.

As of the end of August, the S&P 500’s Shiller P/E ratio — which takes into account inflation-adjusted earnings over the previous 10 years — was above 39. That’s the highest level in about two decades, and well over double the average Shiller P/E for the broad-based index dating back 151 years. However, the bigger concern is that in the previous four instances where the Shiller P/E surpassed and sustained 30, the S&P 500 subsequently lost at least 20% of its value. In other words, the precedent has been set that the S&P 500 gets hit hard when valuations become this extended beyond historic norms.

There’s also the fact that crashes and corrections are quite common. Data from market analytics company Yardeni Research shows that there have been 38 double-digit drops in the S&P 500 since the beginning of 1950. Even though the market doesn’t adhere to averages, we’re talking about a double-digit decline occurring, on average, every 1.87 years. Considering how quickly the market has bounced back from its March 2020 low, it wouldn’t be surprising to see this average double-digit decline timeline coming into focus.

A final front-and-center concern can be seen in the way equities bounce back from bear markets. In each of the eight bear markets prior to the coronavirus crash (dating back to 1960), there was at least one, if not two, double-digit declines in the S&P 500 within three years of reaching the bottom. Put another way, bouncing back from a bear market is a process and not the straight line higher that we’ve witnessed in recent months.

Image source: Getty Images.

A stock market crash would be your opportunity to pounce on these high-quality stocks

But no matter what the stock market does in the near term, buying and holding stakes in great businesses has long been a surefire way to build wealth. Since 1980, the S&P 500 has averaged an 11% annualized total return — and that includes five bear markets.

If a stock market crash were to occur, it would represent the perfect opportunity to buy these three stocks hand over fist.

Amazon

To be honest, there is no such thing as a bad time to scoop up shares of e-commerce giant Amazon (NASDAQ:AMZN). But if you can manage to snag shares of this highly…