In light of potential stock market volatility, one investor has strategically outlined a plan to navigate future crashes. Rather than waiting for market dips before making moves, this investor intends to remain fully invested, focusing on undervalued shares that are likely to thrive even in uncertain conditions.
The investor acknowledges that while market timing can be lucrative for prepared individuals, it comes with inherent risks for those unprepared. Holding cash in anticipation of price drops isn’t seen as a sustainable long-term strategy. Instead, the investor plans to maintain positions in well-researched companies that can capitalize on market downturns.
One standout entity in this strategy is Bunzl, a prominent FTSE 100 distributor. The company has embarked on an aggressive buyback program, committing £700 million annually until 2027 for share repurchases and acquisitions. The investor notes that a market crash could actually benefit shareholders, as these buybacks would reduce the overall share count, thereby potentially boosting earnings per share.
At current valuations, Bunzl’s buybacks are capable of trimming the outstanding share count by as much as 10%. This figure becomes even more impactful if share prices decline further, enabling the company to buy back shares at lower prices, making it advantageous for long-term investors.
Despite facing recent operational challenges and broader market weaknesses, particularly within the U.S. restaurant sector, the investor believes that Bunzl’s fundamentals remain robust. This conviction helps mitigate the stress of holding onto the stock during market downturns, unlike overvalued stocks, which might be harder to justify.
The overarching strategy involves selecting companies that can provide stability and growth rather than waiting on the sidelines with cash. The investor aims to leverage positions in resilient companies like Bunzl, ensuring exposure and potential gains even in adverse market conditions. The approach is not merely a defensive tactic but aligns with the investor’s belief in Bunzl’s strong growth prospects, making it a valuable addition to their portfolio regardless of market fluctuations.
