October has historically been a volatile month in the stock market. Several of the biggest crashes in history came in October, notably 1929 and 1987.
Will the stock market crash a couple of months from now?
Nobody knows. The market is cyclical so we know there will be another crash sooner or later. But it may be before October, during that month, or decades down the line. I would be surprised if we have to wait as long as that, but it is possible.
There are a few things making me nervous about the stock market as this summer rumbles on, such as global geopolitical tensions and uncertainty in US trade policies. Then again, key economies have proven more resilient than some commentators expected and the FTSE 100 recently hit an all-time high.
So, rather than trying to time the next crash, I am focused on what I think is a more productive activity – getting ready for it, whenever it comes.
Window shopping on a grand scale
In a way, you can think of this as being like window shopping.
Right now, I am thinking about which shares I would like to buy if the price was one I thought was attractive.
So I am on the hunt for companies I think have a great business model that has the potential to generate sizeable profits over time.
For now at least, I am not concerned with their share prices. That is because I am making a wishlist of what I would like to buy – without actually making a move.
But if there is a stock market crash and those shares come down to a level I think is attractive, I want to be ready to pounce. After all, such opportunities can be short-lived.
One share I’m eyeing
For example, one share I would be happy to own if I could buy it at what I thought was an attractive price is FTSE 100 engineering specialist Spirax Group (LSE: SPX).
The company’s decades-long streak of annual dividend growth is eye-catching. There is no guarantee that will last, but I am upbeat about the company’s outlook because of its business model.
It targets industrial clients. They have money to spend on engineering projects that keep essential business functions running, even when the economy is weak.
Thanks to long-term client relationships and a range of bespoke solutions, Spirax has been able to become the preferred supplier for many of its clients in certain contexts.
That gives it pricing power, helping to generate profits and support those regular dividend increases. Last year, for example, Spirax reported a post-tax profit of £191m on revenue of £1.7bn. That is a net profit margin of 11%.
Weak demand in China is a risk that could eat into profits. But, at the right price, I would still be happy to add some Spirax shares to my portfolio.
The current price-to-earnings ratio of 21 is too rich for my tastes. But the share is on my watchlist in case there is a stock market crash (or it falls in price regardless of what the wider market is doing).
