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Rupert Hargreaves | Friday, 21st January, 2022 More on: ADM GLEN NWG
It is starting to look as if a stock market crash is brewing. Of course, it is impossible to tell what is just around the corner for equities, so there is no guarantee the market will crash in the short term. However, I have been preparing for uncertainty by acquiring FTSE 100 stocks with growth potential. And with that in mind, here are my favourite shares to buy right now, all of which I would acquire for my portfolio.
One of the reasons why investors are starting to move out of equities is rising inflation. Rising prices are forcing central banks to increase interest rates, which is having a negative impact on the outlook for certain businesses.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
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But this environment could provide a significant tailwind for the resources sector.
Commodity prices have been surging over the past 12 months. A combination of reduced supply and rising demand has combined to send prices charging higher. It does not look as if this trend will end any time soon. It can take years to design and develop new mining facilities. In the meantime, existing producers can only optimise output as much as possible.
This is why I would acquire FTSE 100 commodity group Glencore (LSE: GLEN) for my portfolio to provide protection against a stock market crash. The company is the world’s largest commodity trader, and it also produces significant volumes of critical commodities such as copper and coal.
Commodity trading is a relatively unique business. Profit margins are razor-thin, and to make money, companies need a global network of contacts and infrastructure assets. There are only a handful of firms globally that have the global scale and financial resources required to provide the sort of services that Glencore offers.
As such, with the demand for crucial commodities rising, I think the outlook for the business is better than it has been for many years. Recently, there has also been speculation that the company could be acquired by one of its larger peers.
Despite the firm’s attractive qualities, there are also some major risks associated with the firm. In the past, Glencore has faced accusations of criminality when acquiring assets. It also has a mixed ESG record. These challenges could hold back the company’s growth and potential in the long run.
I believe one of the best ways to protect a portfolio from a stock market crash is to buy corporations with robust business models. This should ensure that even if their share prices fall 50%, these companies should continue to earn a steady income and, hopefully, their prices will recover.
A great example is FTSE 100 company Admiral (LSE: ADM). Car insurance is a legal requirement in the UK. The company is one of the largest car insurance providers in the country. It also offers a range of other insurance products, including home and pet.
In the event of a stock market crash, it is unlikely that consumers will stop buying mandatory car insurance. I also think it is unlikely consumers will stop purchasing other products such as home insurance, although there may be a slight decline in volumes if people decide to cut spending due to the cost of living crisis.
The one risk I will be keeping an eye on is on the group’s balance sheet. The company has an extensive investment portfolio, which it uses to help support insurance claims. The value of this portfolio could decline in a stock market crash, although management is using a defensive strategy. Thanks to this strategy, any impact on the portfolio should be relatively modest.
Still, Admiral is also expanding its business overseas. It has growing divisions across Europe and in the US, which provides a high level of diversification for the enterprise.
With these qualities, I believe the firm can weather any economic and market uncertainty. That is why I already own the shares in my portfolio and would be happy to buy more.
As I noted at the beginning of this article, higher interest rates are one of the reasons why investor sentiment is starting to deteriorate.
While higher rates will hurt some companies, they could provide a windfall for banking stocks. As such, I would add NatWest (LSE: NWG) to my portfolio. I think this stock could provide some protection against an inflation-driven stock market crash.
Higher interest rates will enable the enterprise to increase the rates it charges borrowers. The company has already increased interest rates on its mortgage products after the Bank of England hiked rates at the end of last year.
This should translate into fatter profit margins for the group. As well as this growth, the company has a strong balance sheet. Its capital ratio is nearing 20%, significantly higher than the low-double-digit rate required.
The combination of rising profits and a strong balance sheet could lead to increasing shareholder returns. There is already speculation that the company could announce a special dividend and more share repurchases when it reports its fourth-quarter results in the next few weeks.
That said, there is no guarantee that the corporation will book higher interest rates. The UK banking market is incredibly competitive, and if NatWest’s peers do not raise rates as well, the lender will be unable to do so without losing business. This is probably the biggest challenge the lender faces right now.
Despite this risk, I think the outlook for this FTSE 100 company is incredibly encouraging. That is why it is on my list of one of the best shares to buy right now to protect my portfolio in the event of a stock market crash.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
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Rupert Hargreaves owns Admiral Group. The Motley Fool UK has recommended Admiral Group. 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.
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