The funding neighborhood was taken for fairly the journey final yr. In the course of the first quarter, uncertainty tied to the coronavirus illness 2019 (COVID-19) pandemic lopped greater than a 3rd off of the benchmark S&P 500 (SNPINDEX:^GSPC) in beneath 5 weeks. Buyers spent the next 9 months having fun with a snap-back rally for the ages.

When the curtain closed on 2020, the S&P 500 completed the yr increased by 16%. That is a powerful accomplishment given how steep of a recession the U.S. financial system labored its manner by means of.

Picture supply: Getty Photos.

However I’ve dangerous information: One other inventory market crash goes to occur.

We could not be capable of predict when a crash will happen, how lengthy it’s going to final, or how steep the decline might be, however historical past is crystal clear that inventory market crashes and corrections are a wonderfully regular a part of the investing cycle. Over the past 71 years, there have been 38 situations the place the S&P 500 declined by at the very least 10% from a latest excessive. That works out to a double-digit correction, on common, each 1.87 years.

In 2021, there aren’t any scarcity of potential draw back catalysts. Every thing from COVID-19 infections and response to a scarcity of financial help from Capitol Hill has the potential to shift short-term sentiment and ship the broader market tumbling.

Now for some excellent news: A inventory market crash is a chance for long-term buyers to place their cash to work in nice firms at a reduction. Ought to a crash come up in 2021, the next three shares can be the proper additions to your portfolio.

Picture supply: Getty Photos.

Intuitive Surgical

Healthcare shares are an excellent place to park your cash throughout spikes in market volatility. Since we do not get to decide on once we get sick or what ailment(s) we develop, demand for medicine and gadgets stays fairly regular, no matter how or poorly the U.S. financial system is performing. This holds true for surgical procedures, which is why robotic-assisted surgical techniques developer Intuitive Surgical (NASDAQ:ISRG) is the proper inventory to purchase throughout a inventory market crash.

Shopping for into business leaders is usually a sensible transfer in any market setting. Intuitive ended September with 5,865 of its da Vinci surgical techniques put in worldwide, which is way over any of its rivals on a mixed foundation. What’s extra, a few of the firm’s deep-pocketed friends have run into launch delays of competing techniques. This implies the numerous generations of the da Vinci surgical system will management the lion’s share of soft-tissue robotic surgical procedures for a very long time to come back.

What’s so spectacular about Intuitive Surgical is that it has been constructed on the razor-and-blades enterprise mannequin. The concept right here is to get the client to purchase a low-margin razor, then make financial institution by promoting high-margin blades for a very long time. Intuitive’s da Vinci system is the razor. It is a dear system that generates fairly a little bit of income, nevertheless it’s additionally intricate and expensive to construct. The place the corporate generates most of its margin is from promoting devices and equipment with every process (i.e., the blades), in addition to from servicing its techniques. As extra techniques are put in, these higher-margin income streams account for a bigger share of whole gross sales.

If a market crash does happen in 2021, you may confidently purchase Intuitive Surgical on any weak point.

Picture supply: Getty Photos.

Annaly Capital Administration

One other good inventory to scoop up when the inventory market turns south is mortgage actual property funding belief (REIT) Annaly Capital Administration (NYSE:NLY).

The mortgage REIT working mannequin is fairly easy. Firms like Annaly are borrowing cash at short-term charges and shopping for property (e.g., mortgage-backed securities (MBS)) that bear the next yield over the long term. This distinction between the upper long-term yield and decrease short-term borrowing fee known as the web curiosity margin (NIM). The broader the hole, the extra worthwhile an organization like Annaly may be.

As we enter the early phases of an financial restoration for the U.S. financial system, historical past has proven that the yield curve tends to notably steepen. In different phrases, Annaly’s NIM can be anticipated to widen over the approaching years, regardless of how risky the inventory market will get.

Moreover, Annaly’s portfolio is nearly solely devoted to purchasing company MBSs. An company asset is one which’s backed by the federal authorities within the occasion of default. Though company property have decrease yields than non-agency property, the safety offered by company MBSs has allowed Annaly to make use of leverage to its benefit.

Buyers in Annaly ought to anticipate modest share worth appreciation to go together with a dividend yield that is repeatedly hovered round 10% for greater than a decade.

Picture supply: Getty Photos.

Johnson & Johnson

A 3rd good inventory to purchase if the inventory market crashes is healthcare conglomerate Johnson & Johnson (NYSE:JNJ). As famous, healthcare shares are predominantly insulated from wild market and financial fluctuations, making them superb for funding.

One factor buyers completely love about Johnson & Johnson is that every one three of the corporate’s working segments convey one thing vital to the desk. For instance, client healthcare merchandise is the slowest-growing phase, nevertheless it supplies comparatively robust pricing energy and probably the most predictable money movement. In the meantime, an getting old U.S. and world inhabitants affords an extended development runway for medical gadgets. Lastly, prescribed drugs supply a finite interval of exclusivity however generate the majority of J&J’s margin.

There’s additionally no overlooking Johnson & Johnson’s consistency. The most important publicly traded U.S. healthcare firm has elevated its base annual dividend in every of the previous 58 years. It additionally had a streak of 36 consecutive years of adjusted working earnings development previous to COVID-19, and is considered one of solely two publicly traded firms with a AAA credit standing from Commonplace & Poor’s. For context, that is even increased than the AA credit standing assigned to the U.S. authorities. 

Johnson & Johnson will not supply the identical jaw-dropping development potential as Intuitive Surgical, however you may sleep properly at evening as a shareholder.