The stock market’s plunge last year because of the global pandemic might not be noticeable in a few years’ time. The bull run that began after the Great Recession has suffered a few hiccups over the past decade or so, but largely marches on.
That rightly makes some investors nervous, as the party must end sooner or later, the thinking goes, and the market’s volatility lately, with wild swings in price, could be a harbinger that we’re reaching a peak.
If you’re worried, too, the two stocks below ought to help you to prepare now for any market crash.
1. ABM Industries
Hardly the sort of sexy business many momentum investors seek out, ABM Industries (NYSE:ABM) is a leading janitorial services and facilities manager across commercial, technology, industrial, education, and aviation.
Founded in 1909 as a window washing company, ABM has over $6 billion in annual revenue from a diversified list of customers, yet it’s that sort of mundane task completion that makes ABM an attractive investment in times of trouble.
Its long history also means it has survived and thrived through all kinds of market conditions, and while the COVID-19 pandemic did hurt its operations, there is also much greater awareness for the need for cleanliness and sanitation.
So although first-quarter revenue was down 7.5% year over year, adjusted profits of $68.3 million, or $1.01 per share, were more than 2.5 times greater than the $26.2 million, or $0.39 per share, it generated last year as clients took on more work orders and performed more profitable EnhancedClean jobs that include disinfection routines.
CEO Scott Salmirs said with the rollout of vaccines, ABM is looking forward to a time where “post-pandemic normalcy will reflect a heightened sensitivity to health and hygiene.”
ABM Industries pays a dividend of $0.76 per share that currently yields 1.5% annually, which it has paid every quarter since 1965 and has raised for over 50 years, putting it in that rare group of companies known as Dividend Kings.
Trading at just about seven times the free cash flow it produces, ABM Industries carries a deeply discounted valuation that ought to continue generating substantial returns for investors in good times and bad.
2. Genuine Parts
Auto parts retailer Genuine Parts (NYSE:GPC) could be primed to capitalize on any market collapse, because when times get tough, consumers hold on to the cars they already own and do repair jobs themselves, rather than buy new.
Genuine Parts, which owns the NAPA Auto Parts brand of retail stores and generates two-thirds of its revenue from automotive sales, is already facing potential gains as a computer chip shortage impacts not only the tech sector, but the automotive industry as well.
Car makers are shutting production for weeks at a time because they can’t get the necessary components to build vehicles. That means annual car production is going to drop, and buyers just might decide holding on to their existing rust buckets is a better option.
The retailer saw first-quarter sales jump over 9% on a 4.6% gain in comparable-store sales, helping adjusted earnings shoot nearly 90% higher year over year. Gross margins also expanded for the 14th consecutive quarter.
The robust quarterly performance is already causing Genuine Parts to raise its sales and earnings guidance for the rest of the year, and it expects to generate $700 million to $900 million in free cash flow.
With Genuine Parts’ history of increasing its dividend payments even longer than ABM (over 60 years!), and a record of making a payout longer still, investors have a company that’s been looking out for its shareholders for decades.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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