The Dow, S&P 500, and Nasdaq NDAQ +2.1% indices have been volatile for some time now with analysts anticipating a rise in inflation and a correction of overvalued stocks. Given the circumstances, stock traders are concerned about whether the bubble will pop and will the stock market crash?
A stock market crash would be disastrous for the United States, but it could provide an opportunity for investors to buy solid stocks at bargain prices. Three such stocks are discussed below.
Are Markets Up or Down?
The Dow Jones Industrial Average increased by 1.29% yesterday, while the S&P 500 index also increased by 1.22%. The Nasdaq composite, dominated by tech stocks, appreciated 0.72% on Thursday.
The Dow is up 11.16% year-to-date (YTD); the S&P stocks have pushed the index up by 9.49% YTD. The Nasdaq has advanced 1.84% YTD.
The United States has been successful in controlling the outbreak of cases due to an effective vaccination program. According to the CDC, as of Thursday, approximately 35.8% of Americans had been fully vaccinated, with 46.6% having received at least one dose. Since January, the number of new cases reported per day has decreased by nearly 84%, with 39,825 new cases and 762 new deaths reported on May 13.
What is a Stock Market Crash?
A stock market crash occurs when stock prices fall suddenly and unexpectedly. A major economic downturn, a catastrophic event, or the bursting of a long-term speculative bubble can all trigger a stock market meltdown. It is more severe than a market correction, which occurs when an index goes down 10% from its 52-week high.
Stocks to be on the lookout for
Cincinnati Financial Corporation
Cincinnati Financial (NASDAQ: CINF), headquartered in Fairfield, Ohio, is a property and casualty insurance company that generates revenue from written premiums. It was established in 1950. The value of stock has nearly doubled in the last five years, with a 52-week high of $128.8 and a closing price of $118.15 on May 12. It has a price-to-sales ratio of 2.25 and pays out attractive dividends.
The Coronavirus pandemic has been a blessing in disguise for the insurance industry, as more people recognize the value of life insurance. Total premiums earned increased by 7% in 2020 and premiums from term life insurance increased by 6%.
By accurately pricing products within different states, the company was able to increase premiums by 10% in 2020 through its Cincinnati Casualty Company. The stock price of CINF has risen by 138% in the last year, and it still has room for expansion as it operates in a $5 trillion global industry. Considering the increase in demand for insurance, improvement in financials, and the positive outlook of the insurance industry, people should be quick to invest in the company.
Booking Holdings Corporation
Booking Holdings (NASDAQ: BKNG), headquartered in Norwalk, Connecticut, has revolutionized the travel industry. Its platform allows customers to plan and book their vacations from the comfort of their homes. It is the largest online travel agency in terms of sales.
This explains why the stock has performed well in the last year, with a 15% increase in value and a current market cap of $90.6 billion. However, as a result of the pandemic, revenues have dropped by 15% and gross bookings have dropped by 63%.
The company is a good pick for investors as the stock is still trading at 5 times revenue, despite the current economic downturn, with bookings expected to increase as the country recovers. The company is on track for rapid operational growth, with management anticipating a $3.4 trillion addressable market.
Upwork (NASDAQ: UPWK), based in Santa Clara, California, is a platform that connects clients and freelancers and has revolutionized the talent acquisition industry. The pandemic has severely disrupted traditional business practices. Currently, nearly 225 million jobs can be performed remotely, and this figure is expected to rise by 62% in the coming years.
The firm went public in 2018. The shares struggled at first, but gained 328% in 2020 before falling due to the broader tech sell-off. Revenue and EBITDA increased by 24% and 89%, respectively, in 2020. The firm operates in a $115 billion addressable market, enabling the company to grow exponentially as more people start working from home.
So, Upwork is an excellent investment opportunity because the company has a lot of room for expansion, considering 30% of employees are expected to work remotely by 2024. Furthermore, the company has strong financials and has performed well in financial markets, making the stock an excellent investment during the next market downturn.
The Bottom Line
Upwork, Cincinnati Financials, and Booking Holdings are all fantastic companies that are disrupting their respective markets. When markets fall, these companies will trade at bargain prices, providing investors with an opportunity to profit in the long run.