Markets

2 Unstoppable Stocks to Buy in the Next Market Crash

"Stock market crash" is a phrase no investor likes to hear, but it's a situation you will face sooner or later. Going back to 1928, the S&P 500 has fallen by 10% or more on 54 different occasions, approximately once every 1.7 years. At face value, that information may seem alarming, but consider the silver lining: Every past downturn has ended with the market hitting a new high.

Put another way, each of those events has actually been a buying opportunity. That's why it's important to have a plan: Keep some cash in your portfolio, and know where you want to deploy that cash in the event of a market crash. Generally speaking, I look for companies with a solid competitive position and good prospects for future growth -- those qualities tend to make a stock unstoppable over the long run.

Here are two ideas to get you started.

Stressed person sitting in front of office computer.

Image source: Getty Images

1. Tesla

Tesla (NASDAQ: TSLA) is the leading manufacturer of electric vehicles (EVs). Through the first eight months of 2021, the company held 13.3% market share. And despite significant supply chain headwinds, Tesla managed to produce 237,823 cars in the most recent quarter, up 64% from the prior year. That's impressive, but there is a more important story under the hood; this company is becoming one of the most efficient automakers in the world.

In 2017, Tesla introduced the 2170 battery cell, capable of storing 50% more energy than the previous 1865 model. In fact, CEO Elon Musk said it was the "highest energy density cell in the world, and also the cheapest." More importantly, this technology means Tesla pays just $187 per kilowatt-hour (kWh) for its battery packs, the most expensive part of an EV. That's 10% less than the next closest competitor, and 24% lower than the industry average.

In 2019, Tesla opened the Gigafactory Shanghai, manufacturing the first Model 3 less than 10 months after breaking ground. This helped localize its China business, cutting costs by reducing the number of cars shipped across the ocean on boats. It also boosted Tesla's total production capacity, which now sits at a theoretical 1.05 million EVs per year.

Collectively, these moves helped Tesla cut the cost per vehicle from $84,000 in 2017 to $38,000 in the first quarter of 2021. At the same time, the company delivered an industry-leading operating margin of 6.3% in 2020, and that figure has ticked up to 14.6% in the most recent quarter.

Not surprisingly, Tesla's financial performance has been impressive. In fact, the company has posted a positive GAAP profit for the last nine consecutive quarters, and its top line is growing quickly.

Metric

Q3 2019 (TTM)

Q3 2021 (TTM)

CAGR

Revenue

$24.4 billion

$46.8 billion

38%

Free cash flow

$873.0 million

$4.1 billion

117%

Data source: Tesla SEC filings, YCharts. TTM: trailing-12-months. CAGR: compound annual growth rate.

Looking ahead, investors should expect this momentum to continue. Tesla recently announced the 4680 battery cell, a new model that will cut costs by 56%, extend range by 54%, and reduce capital expenditures by 69%. The company also plans to open two new factories later this year, further boosting its production capacity.

Moreover, Tesla has established itself as a frontrunner in the race to build an autonomous vehicle. In fact, Musk believes the company will have a fully autonomous $25,000 EV on the market within three years. Once that happens, Tesla plans to start an autonomous ride-sharing service, pioneering a market that Ark Invest values at $1.2 trillion by 2030. And Morgan Stanley analyst Adam Jonas believes Tesla could launch a flying car business by 2050, addressing a potential $9 trillion market.

In short, Tesla is pushing the boundaries of modern technology. That's why I plan to add to my position during the next market crash.

2. Upstart Holdings

Upstart Holdings (NASDAQ: UPST) brings big data and artificial intelligence (AI) to the consumer credit industry. Its software platform helps lenders like banks and credit unions quantify risk more precisely. In fact, according to management, Upstart's AI models are four to eight times more accurate than traditional credit scores, allowing lenders to approve nearly three times as many applicants while holding loss rates constant.

To that end, Upstart's business model creates a powerful network effect: More borrowers means more data, which translates into better AI models. And better AI models mean more approved loans (without compromising loss rates), which should bring more applicants to Upstart. This virtuous cycle has translated into supercharged growth for the fintech company.

Metric

Q4 2018 (TTM)

Q2 2021 (TTM)

CAGR

Revenue

$99.3 million

$452.2 million

83%

Free cash flow

$49.3 million

$215.0 million

80%

Data source: Upstart SEC filings, YCharts. TTM: trailing-12-months CAGR: compound annual growth rate.

Looking ahead, shareholders have plenty of reasons to be excited. Upstart recently expanded beyond the $84 billion personal loans industry, entering the $635 billion auto loans market. The company is now licensed to refinance auto loans in 47 states, and five banking partners have already adopted the platform for this purpose.

Here's the bottom line: Upstart collects nearly 1,600 data points per loan applicant, far more than the 12 to 20 variables considered by a typical FICO scorecard. Over time, that advantage should snowball, improving consumer access to credit and boosting business for Upstart's lending partners. Moreover, Upstart plans to bring its technology to other sectors in the future, including credit cards, mortgages, and student loans, addressing the $4.2 trillion consumer lending industry more broadly.

Put simply, the company has a strong competitive position and a sizable market opportunity. That's why I plan to buy this growth stock during the next market crash.

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Trevor Jennewine owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla and Upstart Holdings, Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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