As stock market crash alarm bells ring, here’s my action plan!

The past few months have seen a significant number of red flags that we have seen with market crashes in the past. Yet nobody knows for sure when the next stock market crash will be.

But I do see quite a few things in the current situation that concern me as an investor, from some dizzying valuations in the AI space to heavy government spending.

Here are some practical steps I am taking now to ready myself for the next crash, whenever it may end up coming.

Step 1: reviewing my portfolio

It can be easy to buy shares and then largely forget about them, especially if they do well.

In some ways, that fits my approach as a long-term investor.

After all, I believe that over time, quality will out. So even if a share I own falls sharply during a market crash, if I continue to believe in the investment case, I could ignore the crash and simply hang on to it, hoping for recovery (and more) over the long term.

Still, sometimes changing facts change the investment case for a share – and I think that is true in the current economic circumstances.

For example, I am hanging on to a few easyJet shares. But I sold most of my holding, even though they trade below the agreed bid level in the ongoing takeover.

Why? I see a risk that a takeover could potentially be stalled in a worsening economic climate where high jet fuel prices are eating into airlines’ profitability.

So I decided to take some money off the table rather than hang on for months hoping that the agreed price ends up being delivered.

Step 2: keeping some powder dry

In fact, over the past few months I have been both buying and selling.

But I have had an eye on trying to keep a higher proportion of my portfolio than before in cash, ready to pounce if a stock market crash does throw up bargains.

In practice, that is not always easy!

I had sold some Trainline shares, but a sudden tumble caused by concerns from a regulatory inquiry into how prices are displayed meant that the share price was too attractive for me to ignore, and I filled my boots.

That inquiry is a risk, as are government plans for a state-owned ticketing platform.

But with its large customer base, technological head start and well-known brand, I felt Trainline’s recent share price was a screaming bargain for my portfolio.

Despite such temptations though, I am still keeping some powder dry!

Step 3: make a wishlist

I have also been making a shopping list of shares I would like to buy if a stock market crash makes them cheap enough.

One name on it is US toy retailer Build-a-Bear Workshop (NYSE: BBW).

Its share price has already fallen 59% so far this year. Still, it remains over $25 a share — at one point in the 2020 stock market crash, it fell below $1.50.

Weakening consumer spending and cost inflation are hurting already. They could push revenues and the share price lower.

But I think the experiential toy building model gives Build-a-Bear a strong competitive advantage.

I see it as an excellent business, and it is on my watchlist. So, come to that, are some other shares…

Should you invest £5,000 in Build-A-Bear Workshop right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Build-A-Bear Workshop made the list?

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Christopher Ruane owns shares in easyJet and Trainline.

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