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One of the greatest risks for an investor is an outright stock market crash. Most, if not all, share prices would decline and it would leave my portfolio looking pretty miserable. It was only back in March 2020, at the onset of the pandemic, that the stock markets last crashed.

But stock markets have recovered considerably since then. So much so that Michael Burry of ‘The Big Short’ fame says there’s more speculation and overvaluation today compared to other times the stock market crashed.

It’s not just Michael Burry now though. Charlie Munger, who’s Warren Buffett’s long-standing business partner at Berkshire Hathaway, has had his say recently. Here’s what Munger said, and what I’m going to do.

Charlie Munger: madder than the dotcom boom

Munger was being interviewed at the Sohn Conference in Sydney when he gave his assessment of the current financial markets. He said: “I consider this era even crazier than the dotcom era.”

This is a strong statement considering how very mad the dotcom era was. And of course, markets did crash back in 2000, and didn’t recover for years afterwards. If Charlie Munger is right, then we may be about to see another stock market crash like we did when the dotcom bubble burst.

Stock market crash: here’s what I’m doing

I agree with Charlie Munger in some ways. I wrote about Rivian recently, and described how it reminded me of the dotcom bubble. It’s a pre-revenue company with a market value of close to $100bn. This, to me, seems crazy, even if it may one day go on to great things.

We’ve also seen some US growth stocks crash this year that looked richly valued. Docusign is an example I’ve written about. But there have been others, such as Peloton and Zoom, that have fallen by double-digits yet still look highly valued to me. That said, there are some good businesses here, and I might be interested in buying the shares if they become cheaper.

Charlie Munger did say one other thing in his assessment of today’s stock markets: “You have to pay a great deal for good companies and that reduces your future returns.”

I think this is generally true in the US. But the UK market is cheap right now in comparison. For example, the FTSE 100 index is valued on a forward price-to-earnings (P/E) of only 12 as I write. The US equivalent index, the S&P 500, is valued much higher on a forward P/E of 21.6. There are many good companies in the S&P 500 index, but Charlie Munger may be right in that I’d have to pay a great deal for them. This would certainly reduce my future returns.

So, I’m going to carry on looking for quality UK shares, and always consider the price I pay for the companies I buy. If the stock market does crash, I’ll consider it an opportunity to load up on shares that might be too expensive today.

Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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As pledges for emission reductions continue to make global news, electric vehicle companies are experiencing something of a heyday. Over the past year alone numerous EV companies have come to market, most with extremely high valuations. Here I assess whether two of these EV stocks, Rivian Automotive (NASDAQ:RIVN) and Lucid Group (NASDAQ:LCID), are about to become the next Tesla (NASDAQ:TSLA).

As the largest and most established EV company, Tesla has remained unrivalled for a number of years. Now, new competitors Rivian and Lucid are attempting to shake things up. Both stocks have performed particularly well recently, with Lucid up almost 400% this past year and Rivian up 72% in only a matter of days between 10th and 16th November. 

Rivian and Lucid

My main criticisms of these EV stocks is the vast disparity between share prices and company fundamentals. Rivian’s IPO a few weeks ago is a clear example of this, with shares initially floating at $78 then soaring to a peak of $172 within six days. This has given the company a market capitalisation of over $140 billion, all whilst producing zero cars and reporting losses of $1 billion in the first half of 2021.

Lucid is in the same boat as Rivian. Despite not having produced a single vehicle, its market value has surged past that of Ford Motors to reach almost $90 billion. With the first car not scheduled for release until mid 2022 and recent Q3 earnings reporting a net loss of $1.5bn, I believe its current share price is unjustifiable.

Reservations about these overpriced stocks come also from equity research analysts. For example, Morgan Stanley has recently issued a strong sell rating on Lucid, suggesting the stock price will plummet to $16, representing a 70% downside from its peak share price.

Tesla

In comparison to Rivian and Lucid, Tesla remains in the driving seat as an established and profitable industry leader.

In fact, in a tweet just last month, Elon Musk pointed out just how far behind these new EV start-ups are in comparison to Tesla, the only American car maker to have achieved both positive cash flow and high production volumes in the last 100 years.

Although I believe Tesla has an equally lofty valuation, a whopping $1 trillion, its diversification into the autonomous driving sector sets it apart from traditional EV companies, all competing for the same rapidly diluting market share.

The verdict

Whilst both Rivian and Lucid deserve applause for attempting to disrupt the EV industry with their new cars, I think both stocks are extremely overvalued and incomparable to Tesla. For me, their only achievement is that of being two of the largest US companies by market capitalisation with no revenue

New, smaller EV players face the virtually impossible challenge of rivalling Tesla, a company now producing a million cars per year and logging a profit for the fourth consecutive quarter. I believe it won’t be long before Rivian and Lucid stocks are bumped out of the fast lane and so I am steering clear of these stocks.

Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The stock market hasn’t exactly been the best performer recently. With the discovery of the Omicron virus variant and the uncertainty that comes along with it, US growth stocks have been hit quite hard. And with double-digit declines, some are starting to look quite cheap.

So has the recent volatility created buying opportunities for my portfolio? I certainly think so when it comes to Teladoc (NYSE:TDOC).

Telemedicine getting hammered

Teladoc shares have been pretty abysmal performers in my portfolio this year. Despite having a tremendous run in 2020, the US growth stock has fallen almost 55% over the last 12 months. The decline started long before Omicron entered the picture. But the increased uncertainty undoubtedly hasn’t helped matters.

Despite what the share price indicates, Teladoc has actually been performing admirably. In fact, looking at the latest earnings report, revenue over the first nine months of 2021 came in 108% higher than a year ago, at a record-breaking $1.48bn!

That’s almost 50% more than what was generated in the whole of 2020 alone and was primarily driven by an increasing customer roster along with higher platform usage.

What’s more, if there’s another round of lockdowns is on the horizon courtesy of Omicron, then demand for Teladoc’s services will likely continue to rise even higher. This is one of the reasons why I believe this growth stock may have been oversold, making it look relatively cheap. But if that’s the case, why has the stock seemingly collapsed?

Revenue is surging, profits… not so much

In late 2020, Teladoc completed a massive acquisition of Livongo Health. This move made the company arguably the biggest player in the telemedicine space. But it also caused Teladoc’s ledger to drip with red ink. A large chunk of stock-based compensation was issued to Livongo employees as part of the acquisition. And over the last nine months, this incurred a cost of $241m, which pushed total losses to a staggering $417.8m.

Massive losses are hardly a pleasant sight, so I can understand why investors are moving towards the exit. Even more so, given the firm now has over $1.2bn of debt on its balance sheet. But, personally, I’m not too concerned.

Most of these loans don’t mature until 2025 and, in the meantime, there is over $800m of cash equivalents to meet short-term obligations. Furthermore, stock-based compensation is ultimately a one-time expense. As such, I wouldn’t be surprised to see sudden improvements in profitability in the next 24 months.

A cheap US growth stock worth buying?

Compared to the start of the year, Teladoc shares certainly look cheap. And if management hits its 2021 full-year revenue target of $2bn, that places the price-to-sales ratio at around 7.4. For a business delivering triple-digit growth combined with strong liquidity, that’s quite an attractive price, in my mind. Therefore, I’m definitely considering increasing my position.

Zaven Boyrazian owns shares of Teladoc Health. The Motley Fool UK has recommended Teladoc Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I am currently looking for UK shares to buy for my portfolio in 2022. I am concentrating on finding businesses with an upcoming growth catalyst. This could take many different forms. From companies that may experience a recovery next year to those that could capitalise on a significant economic tailwind. 

With that in mind, here are the five stocks I would be happy to add to my portfolio today, considering their potential next year. 

Shares to buy

The first couple of companies I would buy ahead of 2022 are recovery stocks. The pandemic has decimated the public transport sector, but I am excited by the long-term potential for this industry. To get cars off the road, policymakers will have to encourage consumers to use public transport, which suggests demand for these services will only increase. 

That is why I would buy public transport operators FirstGroup and Stagecoach. I would buy both because they operate in different sectors of the industry.

As such, I believe a portfolio containing both would be a way for me to build diversified exposure to the sector. 

Hospitality recovery

The other recovery plays that interest me are JD Wetherspoon and IWG. Like the rest of the hospitality industry, Wetherspoons has suffered during the pandemic. However, I think it can capitalise on the economic recovery over the next few years. The company’s low-cost offer should appeal to consumers, especially in an inflationary environment when costs are rising across the board.

Meanwhile, serviced office provider IWG is already reporting an uptick in demand. The pandemic has changed how companies and workers view employment. Flexible working patterns are now becoming the norm, and this is leading employers to adopt more flexible office solutions. 

IWG has one of the largest global portfolios of flexible office space. Its flagship Regus brand has a global presence. I think this gives the company a competitive advantage to gain an edge over peers in economic recovery. 

I am interested in these recovery plays because I believe the economy will continue to rebound in 2022. Unfortunately, there is no guarantee this will happen. Further disruption from the pandemic, or an economic recession caused by higher interest rates, could delay the recovery. These headwinds could hold back the recoveries at the companies outlined above. 

UK shares for volatility

Global fintech firm Plus500 has performed relatively well throughout the pandemic. Volatile financial markets led to a surge in trading activity on its platforms last year. Many of the consumers that joined the group in 2020 have continued to trade in 2021. 

I think this trend may persist into 2022. And if there is another pandemic-related sell-off, Plus500 has the potential to capitalise on this activity, just as it did in 2020. 

Despite these qualities, the group does face some challenges in the form of competition and regulations, which could reduce profitability and increase group costs. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.