My ISA is ready for the stock market crash!

The global stock market is falling as concerns mount. These include rising US unemployment, recession fears, a possible artificial intelligence (AI) bubble and a worsening situation in the Middle East.

In the USA, where technology dominates Nasdaq is now in correction territory, down 10% from its recent record high. S&P500 fell 5.6% in three weeks.

Meanwhile, FTSE100 has already fallen 3.5% in August. Some fear this sell-off could turn into a crash!

My answer

While this volatility is undesirable, it is also unavoidable. It is essentially the upfront cost of investing in the stock market.

But selling my stocks out of fear certainly won’t help. And neither will morbidly checking my investment account over and over.

In such situations it is better to go swimming, meditate, walk the dog, read a novel, meet a friend, watch a movie. Netflix series. Anything but scrolling down through scary financial headlines and watching the value of my portfolio plummet.

It’s also important for me to remind myself why I’m a long-term investor. Because I’m trying to build wealth for retirement. At this point, today’s volatility should be a small zigzag on the chart.

History teaches us that the stock market goes up over time. But it doesn’t go in a straight line. That means I’ll have to endure a lot of those sharp declines.

On my failure list

If this turns into a crash, I plan to buy more shares Intuitive surgical (NASDAQ: ISRG) in my ISA.

The company’s da Vinci robotic systems have revolutionized surgery, helping doctors perform minimally invasive procedures ranging from removing tumors to repairing hernias. Intuitive is a world leader.

The stock is up 162% in five years. And while I can’t wait to buy more shares, I can’t justify it when the price-to-earnings (P/S) ratio is 66.

A forward P/E ratio of 66 means investors are paying $66 for every $1 of forecast earnings for 2024. This high valuation indicates very rosy expectations for future growth.

But to be fair, the company is still delivering the goods after two decades of growth. In Q2, revenue rose 14% year over year to $2.1 billion, while adjusted earnings per share (EPS) rose to $1.78 from $1.42.

The number of systems installed increased by 14% to 9,203, while the number of procedures worldwide increased by 17%.

Last year, about 83% of the company’s revenue was recurring, and most of that came from the instruments and accessories needed to operate the razors. Like Gillette, Intuitive makes most of its profits from selling blades, not disposable razors. It’s a powerful business model.

One risk is that executives have noticed that the number of bariatric — or weight-loss — surgeries, such as gastric bypass, is declining. Chief Executive Gary Guthart said:GLP-1 (slimming drugs) are changing the surgical market”.

Fortunately, these procedures are no more than 5% of the total, so I’m not too worried. But it’s a risk worth considering.

Looking ahead, the opportunity remains large. Last year, only about 5% of surgeries that could be performed robotically were done so. But as emerging markets grow, that number is likely to grow.

If the market crashes this year, I would happily buy more shares of this great company.