The recent market crash means that there are a number of cheap stocks available to buy in a variety of sectors. Certainly, their prices could move lower in the short run due to risks such as a weak global economic outlook and the potential for a second wave of coronavirus. However, over the long run they could deliver impressive returns that boost your retirement prospects.

As such, buying a diverse range of cheap shares today could be a sound move. They could offer significantly higher returns than other assets over the coming years.

Market crash

The recent market crash may have dissuaded some investors from buying cheap stocks. After all, it was one of the fastest declines in the stock market’s history. There may even be further risks ahead, with the potential for a second crash later in the year should a spike in coronavirus cases take place.

However, declines in the stock market are not all that uncommon. For example, over recent decades investors have experienced other bear markets such as the global financial crisis and the tech bubble.

As such, temporary declines in stock prices are likely to occur fairly regularly over an investor’s lifetime. While they can cause panic in the short run due to the paper losses they create, on a long-term view they provide buying opportunities that can positively impact on your portfolio’s performance.

Buying cheap stocks

A stock market crash presents an opportunity to buy cheap stocks across a wide range of industries. Weak investor sentiment and challenging trading conditions over the short run can combine to cause high-quality businesses to offer wide margins of safety. Over time, such companies are likely to experience improving operating conditions, rising profitability and growing sentiment among investors. This can lead to rising stock prices and high returns for investors who bought while stock prices were low.

Of course, ensuring that you purchase attractive businesses is highly important at the present time. Some companies may struggle to survive a period of weak economic performance that causes disruption to their operating environment. Therefore, focusing your capital on financially-sound businesses with wide economic moats could be a sound move that lowers your risks and boosts your long-term returns.

Relative appeal

Since the stock market has always recovered from its bear markets and downturns to post new record highs, buying cheap stocks today is likely to produce long-term growth via a successful recovery.

Moreover, on a relative basis the stock market appears to have significant appeal. Other mainstream assets such as cash and bonds lack return potential due to low interest rates that may remain in place over the medium term to support an economic recovery. As a result, stocks may be the most attractive means of improving your portfolio’s prospects and of increasing your chances of retiring early.

More reading

• 3 ASX shares that I’d invest $1,000 into EVERY month
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• Why I think the WiseTech share price is in the buy zone
• Here are the top 5 ASX tech shares on the All Tech Index

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX tech shares have been dominating the ASX news cycle over the past few weeks and months. Whether it’s Afterpay Ltd (ASX: APT) or Xero Limited (ASX: XRO) making new all-time highs every week or Zip Co Ltd (ASX: Z1P) shares rocketing more than 600% since March, these tech shares are never far from the headlines these days.

So I thought I would examine which ASX tech shares are the most dominant on the ASX today. The S&P/ASX All Technology Index (ASX: XTX) is the ASX index that tracks the tech space in Australia, so let’s take a look at the top 5 shares that move this index.

1) Afterpay Ltd (ASX: APT)

No real surprise that Afterpay takes the ASX crown with an 18% weighting in the index. Afterpay has been on an incredible run in recent months. After bottoming out at $8.01 in mid-March, Afterpay shares made yet another fresh record high at $76.62 in intraday trade yesterday – a trough to peak rise of 857% in just the last 3.5 months.

2) Xero Limited (ASX: XRO)

The second-largest ASX tech share in the index is cloud-based accounting software giant Xero with a 10.8% weighting. This is another company that investors can’t get enough of these days. Xero shares have climbed nearly 60% since their March lows and made a new all-time high just yesterday of $94.31.

3) Seek Limited (ASX: SEK)

Seek takes out the ASX tech bronze medal with an 8.2% weighting. Seek is the largest provider of online classifieds in the jobs and employment space. With its $7.55 billion market capitalisation, Seek is one of the companies that managed to effectively disrupt the old newspaper’s fabled ‘rivers of gold’ classifieds business model. Unlike Afterpay and Xero though, Seek shares haven’t been able to top their February highs just yet, although the Seek share price is still up nearly 80% from its March lows.

4) Computershare Limited (ASX: CPU)

Computershare is something of an ‘under the radar’ tech share these days. It has been around a while too, having started life back in 1978. This company makes a crust by managing share registries, corporate stock accounts and employee share plans. Chances are if you invest in ASX shares already, you will be familiar with its services. Like Seek, Computershare shares are still a ways off of their pre-March highs, although investors would have enjoyed the stock’s 55% surge since its March lows.

5) REA Group Limited (ASX: REA)

REA is our fifth and final ASX tech share on the XTX index. Another ‘newspaper disrupter’ at its heart, REA runs realestate.com.au – the most popular online real estate marketplace in Australia by a long-shot. This company has made its investors an absolute fortune over the past 2 decades with the REA share price up a staggering 37,400% since July 2000. REA shares took a big tumble in the March crash this year, but have since recovered more than 60% from their lows.

Foolish takeaway

AS you can see, ASX tech shares come in all shapes and sizes. But as this sector has shown in recent months, the tech space can be one of the most lucrative to invest in. The ASX tech index is one that deserves to be watched closely going forward, and I think all ASX investors should be familiar with its major holdings.

More reading

• What does COVID-19 and the payment revolution mean for Afterpay and Sezzle?
• ASX 200 drops 0.6%, Afterpay hits a new record
• Short sellers are betting US$20bn against the skyrocketing Tesla share price
• The Openpay share price is surging today. Is it the next Afterpay?
• Why Kogan, Netwealth, Silver Lake, & Zip Co shares are storming higher

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended REA Group Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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One thing that all ASX investors should know is that market crashes are inevitable. The very nature of capital markets encourages fear and greed at every turn. These duelling emotions cause market volatility, corrections and sometimes crashes.

We’ve recently had one of the most severe and simultaneously short market crashes in history back in March, so many investors will be hoping that we won’t see another crash for a while. But the next crash, whether it’s 1 month or 10 years’ away – is still inevitable. So with this sobering reality in mind, here are the 3 ASX shares that I won’t be hesitating to buy if and when the next crash comes around.

Washington H. Soul Pattinson & Co Ltd (ASX: SOL)

‘Soul Patts’ as its easily known, is one of the best dividend-paying shares on the ASX, in my opinion. It has increased its dividend every year since the year 2000 and paid a dividend every year going back to 1903. That’s a record that cannot be rivalled by any other ASX company.

Today, Soul Patts is more of a conglomerate than a real company. It owns massive stakes in several quality ASX companies, including Brickworks Ltd (ASX: BKW) and TPG Telecom Ltd (ASX: TPG). I already own shares in Soul Patts, but I would love to load the boat when the next market crash does come around.

VanEck Vectors Wide Moat ETF (ASX: MOAT)

This exchange-traded fund (ETF) is one of my favourite passive ASX investments. It aims to hold a mid-sized portfolio of US shares that display characteristics of possessing a wide economic moat. A ‘moat’ is a Warren Buffett term that refers to a company’s intrinsic competitive advantage. This might be a strong brand, intellectual property assets, or stickiness of a product. Some of MOAT’s holdings include credit card company American Express, cereal maker Kellogg and Buffett’s own Berkshire Hathaway. MOAT will be in my sights if there’s a good pricing opportunity down the road, to be sure.

Macquarie Group Ltd (ASX: MQG)

Macquarie is sometimes called the ASX’s ‘fifth bank’, but this characterisation is slightly misleading. This financial company does offer banking services much like the big four banks like Commonwealth Bank of Australia (ASX: CBA). But most of Macquarie’s operations are in the asset management and investment banking arenas, which I think are far better placed for shareholder wealth creation than the traditional banking services these days.

Macquarie is a rather cyclical share that tends to drop heavily in market crashes and enthusiastically recover afterwards. As such, I’m looking forward to starting a position in this company when the next buying opportunity exposes itself.

Foolish takeaway

Market crashes are a scary time to have money in shares. But they are also usually the best time to be buying shares for your portfolio. I’m not hoping for another crash, but I sure will be ready to buy these ASX shares when it does come around.

More reading

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• Ramsay and 2 other ASX shares to buy and hold beyond 2026
• 3 ASX shares I’d invest $1,000 into right now

Motley Fool contributor Sebastian Bowen owns shares of VanEck Vectors Morningstar Wide Moat ETF and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Macquarie Group Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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What does the COVID-19-driven shift to online shopping mean for Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL)? 

Changes in the way we pay

Giving a keynote address at Morgan Stanley in June, Reserve Bank of Australia’s Assistant Governor Michele Bullock explored the health crisis’ disruption of the retail payments system and its implications. 

According to Bullock, “merchants and consumers have changed both their payment preferences and their mode of interaction.” 

To support the contention, Bullock presented some staggering statistics that revealed the death of ‘paper’ payment instruments. 

For instance, use of cheques “has declined from around 50 per capita per year in the 1990s to around 2 per capita in 2019” as many payments became electronic. 

Inevitably, the shift to electronic payments is seeing the decline in the use of cash. 

In fact, Bullock cited RBA’s recent consumer payments survey, which found that “a third of survey respondents did not use cash for any payments”, although “around 10 per cent used cash for all their payments.” 

Importantly, the decline in the use of cash and the rapid acceptance of cards was an “important enabler for online commerce, allowing payments to be made in a remote environment.” 

Afterpay, Sezzle, BNPL, and the dash from cash

The dash away from cash, of course, boosted companies like Afterpay, which saw early adoption from online and e-commerce retailers. 

In fact, online sales constitute the majority of Afterpay and Sezzle’s revenue pie. For example, in FY19, Afterpay’s in-store cumulative underlying sales contributed 18% to Australia and New Zealand’s combined underlying sales, which means that the vast bulk of Afterpay’s underlying sales for Australia and New Zealand were online. 

But just because more people are making online purchases does not – on its own – mean that more people will make these online purchases using Afterpay and Sezzle. 

However, Sezzle’s executive chair and CEO Charlie Youakim certainly drew that conclusion when announcing the company’s record 2Q20 in a July 7 update, highlighting the change in consumer behaviour as a factor in Sezzle’s performance. 

Youakim wrote that Sezzle’s “performance reaffirms our product’s utility to consumers looking for a smarter way to budget their personal finances and the overall market shift to eCommerce.” 

The Sezzle update further stated that “with nearly 100% of Sezzle’s transactions via eCommerce, the Company is well-positioned for the ongoing move to online.”

Youakim then noted that Sezzle’s strong performance in Q2 is “reflective of an improving consumer profile combined with an accelerated adoption of eCommerce due to the [COVID-19] pandemic.” 

The emphasis on eCommerce and the shift to online certainly seemed to benefit Sezzle, as its 2Q20 represented the top 3 months of monthly underlying merchant sales in its history.

In its latest investor presentation, Afterpay echoed Sezzle and stated that “since the impacts from COVID-19 began, we have seen consumers shift further towards online spending.”

COVID-19 and the new normal

Even when COVID-19 is contained or a vaccine disseminated, people are now likely to be more vigilant about hygiene and social distancing, cutting down trips to brick-and-mortar stores. 

This will compress discretionary in-store purchases, while boosting online retailers and retailers with a sound online presence. 

The new normal of COVID-19 will see consumers shift even more of their purchases online. 

RBA’s Bullock similarly concluded that “the increased use of online shopping, either through necessity or preference during the ‘stay at home’ period, seems likely to be a permanent shift.”

In my view, this shift could increase the volume of transactions that Afterpay and Sezzle process. 

Additionally, more consumers going online may mean more opportunities for merchants to sell more per consumer. This is because the more purchases we make online, the more tailored the recommendations become, and the more likely we are to make add-on purchases or get directed to products we did not realise we wanted. 

In the end, Afterpay and Sezzle seem well-positioned to succeed in the post-coronavirus world.

More reading

• ASX 200 drops 0.6%, Afterpay hits a new record
• Short sellers are betting US$20bn against the skyrocketing Tesla share price
• The Openpay share price is surging today. Is it the next Afterpay?
• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• These ASX fintech shares are tackling COVID-19 head on

Motley Fool contributor kprakapenka has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many stocks may have experienced a rebound after the 2020 market crash. However, a difficult outlook for the world economy means that a second market crash cannot be ruled out in the short run.

While that scenario may cause short-term pain for investors, it has the potential to provide buying opportunities for long-term investors.

Through purchasing high-quality businesses while they offer wide margins of safety, you could benefit from the stock market’s recovery potential and boost your chances of making a million.

A second market crash

Although the 2020 market crash may have priced in a more challenging outlook for many businesses, their prospects could realistically worsen over the coming months.

For example, there could be a second wave of coronavirus. Although lockdown measures have largely been successful, little is known about coronavirus at this stage. As such, it could return as lockdown measures are eased, which may cause investor sentiment to weaken.

Furthermore, geopolitical risks continue to be relatively high. Tensions between the United States and China may increase in the short run, while political risks in the US could increase later in the year as the election nears. In Europe, Brexit is likely to be a persistent risk over the coming months that could hurt investor sentiment and send stock prices downwards.

Buying opportunities

A second market crash may be bad news in the short run, but could prove to be a buying opportunity over the long term. It may allow investors to purchase high-quality businesses while they offer wide margins of safety.

Historically, this strategy has been a sound means of capitalising on the cyclicality of the stock market. It may not produce high returns in the short run, but investors with sufficient time to experience a market recovery could enjoy relatively high returns.

Of course, if economic conditions worsen, it could be a sound move to invest in financially-sound businesses. They may stand a better chance of surviving a period of lower growth, and could offer less risk and greater return prospects over the coming years.

Making a million

Buying shares during a market crash could allow you to benefit from the recovery potential of the stock market. It has an excellent track record of producing strong gains following every one of its past bear markets and downturns.

Although it is exceptionally difficult to buy stocks at the very bottom of a market crash, purchasing them when they appear to offer a discount to their intrinsic value could prove to be a shrewd move. It may lead to paper losses in the short run should the economic outlook worsen, but over the coming years it may improve your portfolio returns. It could even allow you to obtain a seven-figure portfolio as the stock market and the wider economy recover.

More reading

• What does COVID-19 and the payment revolution mean for Afterpay and Sezzle?
• These are the 3 steps I’d take to build a dividend share portfolio right now
• Don’t waste the stock market crash! I’d buy bargain stocks to get rich and retire early
• Fluence share price surges 20% on update
• ASX 200 drops 0.6%, Afterpay hits a new record

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why a second stock market crash of 2020 could be your chance to make a million appeared first on Motley Fool Australia.

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