Worried about a stock market sell-off? 2 cheap stocks to buy now

Some investors may understandably worry about the potential stock market crash. After all, it’s been volatile ever since inflation started skyrocketing at the end of 2021. This has led the Federal Reserve to talk about interest rate hikes in an attempt to rein in price rises in the economy. real.

If you’re looking for stocks that can hold up well in a stock market crash, Target (NYSE: TGT) and Tilly’s (NYSE: TLYS) can do the trick. Both are selling at cheap valuations, which could keep them from falling as much as the many stocks that are selling for more.

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Target’s digital sales complement physical locations

Target has been one of the main beneficiaries of the coronavirus pandemic. The company has increased sales by $27 billion since 2019. Target has undoubtedly been helped by being considered an essential retailer, allowing it to stay open during shutdowns when others have had to close.

However, management had done a great job developing Target’s multi-pronged interconnected sales channels. Target, arguably more than any other retailer, offers shoppers an array of convenient ways to get what they’re looking for. Indeed, the $27 billion increase in sales since 2019 was driven equally by stores and digital options.

The surge in sales propelled Target’s operating profit margin, to 8.4%, to its highest level in the past decade. And despite the reopening of the economy, management expects sales to grow a few hundred basis points in fiscal 2022 and its operating profit margin to remain above 8%.

TGT price to free cash flow chart

Price TGT compared to free cash flow given by Y charts.

Fortunately for investors, Target shares trade cheaply compared to two of its main rivals, walmart and Costco.

Tilly’s records record revenue

Tilly is a specialist retailer headquartered in California, and with the bulk of its stores in California, Texas and Florida. The company has done a great job of bouncing back from the disruption caused by the pandemic.

Tilly’s reported its highest earnings per share in its last financial year in a decade. Management planned well in advance and secured sufficient quality stock to sell in the event of widespread shortages. Also, as its competitors failed to find products to sell, Tilly’s was able to sell its inventory at higher profit margins. Its gross profit margin of 35.7% was also the highest in the past decade.

The company is one of the smallest brick-and-mortar retailers in the United States, with approximately 241 locations, but management plans to add 15 to 20 stores over the coming year.

TLYS price to free cash flow chart

TLYS price versus free cash flow given by Y charts.

Like Target, Tilly’s stock is cheap on price-to-free-cash-flow and price-to-earnings measures. This is true whether you look at Tilly’s valuation historically or in comparison to other companies.

A final word on evaluation

Target and Tilly are undoubtedly inexpensive, as noted above. This feature can go a long way in protecting their Stock prices to fall further. While these aren’t explosive growth stocks that will grow your money 10x in five years, they will help protect your portfolio in the event of a market crash.

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Parkev Tatevosian owns Tillys. The Motley Fool owns and recommends Costco Wholesale. 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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