The move lower we’ve seen in the FTSE 100 over the past week can’t currently be termed a market crash. A swift drop of over 20% is usually the benchmark used for something to be called a crash. Yet nobody knows if the market will continue to fall in the coming weeks. So in preparation, here’s my current watchlist of ideas I’ll snap up if stocks keep tumbling.
Waiting patiently
Marks and Spencer (LSE:MKS) is a stock I’ve liked for a while but, unfortunately, it had already rallied hard by the time I really looked into it. It has over doubled in value over the past two years, and is up 51% over the last year.
It has been on my watchlist specifically if we see the share price fall. It’s still trading above 300p, but if it gets closer to 250p then I’d be looking to buy. My main reason for wanting to get in is due to the strong transformation the company has seen on over the past few years. It has successfully managed to pivot both the Food and Clothing & Home divisions. The 2023 report spoke of how both areas have delivered 12 consecutive quarters of sales growth.
This has ultimately fed down to the bottom line, with profit before tax up 58% versus 2022. Even though this is great, I feel investors maybe got a bit over-excited in recent months, pushing the share price too high, too fast. There’s also the ongoing risk of weaker demand from consumers on the high street who are still feeling the cost-of-living pinch.
Therefore, I’m being patient and waiting to see if the share price moves lower to give me a nice discount to buy at.
Pessimistic right now
On the other end of the spectrum, I’ve got Burberry (LSE:BRBY) on my watchlist. Given that the stock’s down 67% over the past year, you might think I’m crazy.
However, when I wrote about the stock in detail recently, I flagged up some key points. For example, even with this fall, the price-to-earnings ratio is only just below 10. Therefore, I don’t see it as an undervalued buy right now.
Further, in a scenario where there could be a crash, consumer discretionary stocks often get hit hard. This is because during a recession, people often cut back on luxury spending.
Putting that all together, I don’t want to buy Burberry shares today. But if we saw the stock fall significantly over the next month, there would come a point where I’d step in and buy. This is because the luxury fashion house is iconic and has proven over many decades that the business model works. I don’t see any risk of it going bust.
With a new CEO and a swift strategy shift, I think that the brand will be able to come out of the woods alive, albeit over the long term.
The post Here’s my updated FTSE 100 watchlist for a stock market crash appeared first on The Motley Fool UK.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry Group Plc. 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.
