3 Discounted Growth Stocks to Buy If There's a Stock Market Crash

3 Discounted Growth Stocks to Buy If There’s a Stock Market Crash

Things have been nearly perfect for Wall Street and the investment community of late — perhaps a bit too perfect.

Since the benchmark S&P 500 ( SNPINDEX:^GSPC ) bottomed out in March 2020, the index has more than doubled in value. It’s the strongest bounce back from a bear-market bottom in the S&P 500’s long history. Yet history also shows that stock market crashes and corrections are a common occurrence and the price to be paid for taking part in one of the greatest wealth creators on the planet. Image source: Getty Images. Stock market crashes and corrections are a common occurrence

Data from market analytics company Yardeni Research shows that the S&P 500 has undergone 38 double-digit percentage moves lower since the beginning of 1950. This works out to a notable decline, on average, every 1.87 years . Even though Wall Street doesn’t adhere to averages, it does demonstrate just how frequent steep corrections and crashes have been throughout history.

Speaking of history, Wall Street has consistently shown for decades that bouncing back from a bear-market bottom is a process. Following each of the previous eight bear market troughs, the S&P 500 shed at least 10% of its value on one or two occasions within 36 months. We’re currently more than 19 months removed from the pandemic bottom and have yet to endure a double-digit decline.

History has also been quite clear what happens to equities when valuations get overly extended to the upside. On Nov. 1, the S&P 500’s Shiller price-to-earnings (P/E) ratio closed above 39. The Shiller P/E examines inflation-adjusted earnings over the past 10 years. In the four previous instances where the S&P 500’s Shiller P/E surpassed 30, dating back to 1870, the index has subsequently lost at least 20% of its value .

The point being that the likelihood of a crash or correction is growing. We may not know precisely when it’s going to happen, how steep the decline will be, or how long it’ll last, but this data certainly offers credence to the idea that a double-digit percentage drop may be coming. Market declines are a surefire opportunity for patient investors

The good news for long-term investors is that every single double-digit percentage decline in the stock market throughout history has proved to be a buying opportunity. These drops have been especially lucrative opportunities to buy discounted growth stocks , which tend to get hit hard during crashes and corrections.

If a stock market crash or steep correction does rear its head, the following three discounted growth stocks would make for perfect buys. Image source: Getty Images. Redfin

The first discounted growth stock investors can confidently scoop up during a crash or correction is technology-driven real estate company Redfin ( NASDAQ:RDFN ).

The biggest prevailing critique of Redfin is that the company has benefited from historically low mortgage rates, which are bound to head higher over time. History has shown that higher mortgage rates tend to suppress homebuying activity, which would, in turn, slow Redfin’s rapid growth rate. While this assessment has often been spot on for traditional real estate companies, Redfin is far from traditional.

When a buyer or seller seeks a real estate professional, they’re often going to pay a listing fee/commission ranging between 2.5% and 3%. However, with Redfin, the listing fee is either 1% or 1.5% , depending on how much prior business was done with the company. According to the National Association of Realtors, the median existing home sold in September 2021 had a sales price of $352,800. This means sellers choosing Redfin may be able to save a median of $7,000. That’s not pocket change, and it demonstrates Redfin’s willingness to save its clients money.

Beyond just undercutting traditional real estate firms on price, Redfin is relying on its higher-margin personalized services to woo new clients. For instance, the company’s Concierge service instructs sellers on staging and upgrades that’ll help them maximize the sales price of their home. There’s also the RedfinNow service, which has been expanded to a number of new cities. RedfinNow acquires homes from sellers with cash, thereby removing the hassle and haggling that typically accompanies selling a home.

Since the end of 2015, Redfin’s share of U.S. existing home sales has consistently expanded from 0.44% to 1.18% , and it has plenty of room to grow. If a big dip were to arise in the broader market, it’d be the perfect stock to scoop up. Image source: Pinterest. Pinterest

Another discounted growth stock that’d be smart to buy if a market […]

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