A bear market is a phrase that refers to the situation when securities prices drop by 20% or more from their recent highs. Bear markets often cause negative feelings among investors, as well as widespread concern for the future. Individual commodities and securities can be considered to be in a bear market, although the phrase typically refers to declines in an overall stock market. When in a bear market, some people choose not to invest, but you can still find stocks to buy in this situation.
When you want to buy stocks in a bear market, it’s helpful to consider which stocks performed well in previous bear markets. By looking at stocks that go up in a bear market, you can mitigate some of the risk associated with investing when numbers are down. Some of the best stocks to buy during a bear market include:
- Gilead Sciences.
- Ross Stores.
- Dominion Energy.
- Exxon Mobil.
- Universal Corporation.
- Duke Energy.
When you are looking at which stocks to purchase during a bear market, it’s helpful to understand the sectors that performed the best during the last prolonged bear market, which took place between 2007 and 2009. Energy had the highest performance, while others that rank highly include materials, industrials, healthcare, telecom, and technology. Gilead Sciences falls under the healthcare sector and continues to perform very well.
Healthcare is a necessity, even during a recession. People tend to cut back on their expenses as much as possible when money is tight, but they can’t skimp on healthcare or medications. Gilead Sciences released major drugs during the last extended bear market, which were Atripla and Truvada, and it also received royalties on Tamiflu, the main treatment for influenza. The pharmaceutical giant has additional exclusive drugs coming in the near future, and a new CEO promises to lead the company in a strategic manner that should benefit investors.
Walmart has a value proposition that’s hard for other retailers to match. It delivers the goods people need at low prices, which is even more appealing to consumers during a recession. Even before the recession of 2008, Walmart was expanding rapidly and never dipped below 7% in year-over-year revenue growth. As the largest retailer in the world, Walmart has shown its ability to maintain a steady growth cycle while increasing its earnings, even when competing with online and brick-and-mortar retailers.
Another one of the stocks to buy in a bear market is Ross Stores. Similar to Walmart, Ross is a retailer that offers discounted prices on brand-name goods. In the last four quarters, the company has more than $15 billion in sales, and it continues to thrive when the economy dips. However, it’s also a company that does well when the economy is thriving because many of its loyal customers enjoy shopping at its stores.
This apparel retailer has experienced revenue growth every quarter but one since the previous bear market started and has increased in income during each of those quarters as well. If you’re looking for bear stocks to buy, this is one to consider, as the company has proven its ability to maintain growth during difficult financial times.
When buying in a bear market, consider adding AutoZone shares to your portfolio. Vehicle sales tend to decline during recessions, especially the sale of new vehicles. Therefore, car owners are more likely to need parts for their existing cars because they may not be shopping for new models. During the last major recession, the year-over-year operating income and revenue of AutoZone increased each quarter.
Following the recession, the number of new car sales increased dramatically, which caused AutoZone to decline somewhat. However, the models purchased in the last few years will start to need more maintenance and repairs, resulting in their owners shopping at AutoZone for the necessary parts. This could be one of the best stocks to own in a bear market.
Telecommunications is another sector that continues to thrive, even during a recession. When you’re wondering what stocks to buy in a bear market, you may want to consider investing in AT&T. It is considered one of the safest options because the company has paid a higher dividend for the last 34 years. In the past few years, AT&T has become a media conglomerate, thanks to the acquisition of DirecTV and merger with Time Warner. It expects to return to historical leverage levels by the end of 2022 and continues to provide high yields for investors.
Enbridge is another of the best stocks for a bear market. This energy company offers a combination of growth and yield and will continue to do so for at least the next few years. The current dividend yield is above 5%, and experts expect the company to continue to meet its 10% annual average growth rate target throughout the year 2020.
Enbridge owns a network of storage and transportation assets that connect regions throughout North America that produce gas and oil. The demand for its pipeline capabilities should continue to increase, partly due to advances in shale drilling, which makes it a safe choice that can help you create a balanced portfolio.
Energy is generally a safe bet when you’re considering what to buy in a bear market. Dominion Energy is an aggressive company that targeted a 10% annual dividend growth in 2018 and 2019 and a 6-10% growth rate in 2020. As one of the nation’s largest transporters and generators of energy, it has paid uninterrupted dividends every year for more than eight decades. In the last 10 years, the brand has focused on developing conservative strategies while exiting the production and exploration business. As a result, Dominion Energy has become more resilient to market fluctuations, so it’s a less risky investment choice.
Verizon is another of the telecommunications companies that lead the sector, although it hasn’t expanded its focus the way AT&T has in the recent past. Instead, Verizon has focused on its core business of providing wireless service. It continues to invest in network quality, which has resulted in a postpaid connections share above 40% and leads the market in this area. The company also has a massive base of subscribers, making it a reliable source of revenue that is passed on to its investors.
It has paid out dividends for over 30 years. Additionally, tax reform and cost-saving initiatives have freed up cash in the company, allowing it to reduce its debt. Verizon expects to experience growth in adjusted earnings over the next few years.
Exxon Mobil has led American companies in dividend histories, paying dividends for more than 100 years and raising its payout each year since 1983. Although the energy sector can be somewhat volatile, Exxon Mobil has a disciplined approach. The company’s strengths include a conservative use of debt, a focus on business units that complement its core offerings, and a disciplined approach to capital allocation.
Other energy companies have had to make drastic spending cutbacks to return dividends to shareholders, while Exxon is pursuing am ambitious growth plan with a goal to double earnings by the year 2025. As a result, investors could stand to earn quite a bit from the company.
Universal Corporation falls under the consumer staples sector and has a market value of more than $1 billion. It has paid dividends for the last 47 years in a row, thanks to its position as the dominant supplier of burley and flue-cured tobacco that comes from Asia. Manufacturers of tobacco products have to work with Universal Corporation, which maintains the demand flow, and its core business requires minimal capital. These factors make it a safe investment, even during a bear market.
Another stable company to consider investing in is Duke Energy. The regulated utility company has a market value of $57.6 billion and has paid dividends to its investors for 91 straight years while showing no signs of slowing. More than 7.5 million retail electric customers rely on Duke Energy, spread across six states in the Southeast and Midwest. Additionally, the company provides natural gas to more than 1.6 million customers in the southern part of the country.
Over the next few years, Duke Energy plans to invest $37 million to expand its regulated gas and electric earning base. If the plan is successful, the company will generate between 4% and 6% annual EPS growth through the year 2022. The aggressive expansion plan, which includes improvements to the infrastructure, is encouraging to investing experts, who expect the company to experience above-average rate base growth in the near future.
Investing during a bear market can be stressful, especially if you’re not sure which companies held up well in previous bear markets. For more information about buying stocks during this type of market, join a Raging Bear webinar. Our experienced trainers can give you the tools and resources you need to help you maintain a strong and diverse portfolio.