In investing, cash is king during market crashes.
It is a source of back-up working capital.
It gives managers the flexibility to eye off acquisitions when competitors fall to their knees.
And it means dividends have a better chance of being paid year-in-year-out.
So when you can buy shares in quality cashed-up, dividend-paying businesses at good prices, you shouldn't delay. Here are three such companies you could buy during a market crash:
- Telstra Corporation Ltd (ASX: TLS)
Telstra may be a boring stock, but that's perfect for the dividend-hungry investor. The company not only has a huge cash balance, it is also likely to grow its cash pile for many years. Indeed, the telecommunications heavyweight is set to get a cash windfall from the government's NBN Co. In addition, the divestment of non-core assets and growth in lucrative business lines means Telstra's dividend is extra reliable, in my opinion.
Of course, risks are ever present – such as capital risk (i.e. the risk its share price falls). However, at $5.30 per share, Telstra is trading below 'fair' value in my opinion. As it approaches $5, the more compelling its valuation becomes.
- Flight Centre Travel Group Ltd (ASX: FLT)
Flight Centre's business model is often criticised for being old-school or vulnerable to technological disruption. However, in my opinion, this proven growth company is the perfect example of an ASX value share to buy in a market crash. Sure, short-term headwinds could hurt Flight Centre's share price. But with well over $500 million of cash in the bank, Flight Centre is able to take decisive action on capital allocation where and when it needs to. And the Flight Centre management team have proven they're capable of doing just that.
For example, Flight Centre recently made two acquisitions for growth. One in the technology space, and another within its growing US business. However, neither acquisition will come close to threatening the group's ability to pay a reliable dividend in the next 12 months.
- Altium Limited (ASX: ALU)
Altium may not be the name that springs to mind when your average Aussie thinks of shares to buy in a market crash. Altium is a value share with a difference. It doesn't look cheap. Indeed, it's only on closer inspection that you realise this growing $580 million technology company could be a value play over the long-term as it has an admittedly high normalised price-earnings ratio.
Altium has $80 million in cash, which is almost 14% of its market capital, with no debt. It is also strongly growing in international markets. The prospect of holding a share with exposure to the US dollar and Euro is more appealing now that the Australian dollar has fallen.
Foolish takeaway
Market crashes are often the best time to pick up shares of great businesses trading at compelling prices. While you should always conduct your own due diligence, I think long-term investors could do far worse than add each of these companies to their watch lists.
