The 7 Best Bear Market Stocks to Buy Now
Although the market has rallied since the start of November, on rising hopes of a pivot on interest rates by the Federal Reserve (aka a “Fed pivot”), that doesn’t necessarily mean it’s time to abandon the best bear market stocks and dive back into “risk-on” types of plays.
Even as the Fed, in light of data indicating that inflation may be cooling, could soon slow down the pace of subsequent rate hikes, according to one Fed official, it may not be until 2024 that the central bank starts to cut interest rates again.
If rates keep rising (albeit more slowly than before), the economic slowdown could continue, possibly morphing into a recession in 2023. In turn, stocks, especially more cyclical/speculative stocks, could remain volatile over the next twelve months.
With macro issues like inflation, interest rates, and a possible recession still in play, it may be wise to stay defensive. Owning the seven best bear market stocks is a great way to do so. Each one stands to remain resilient through a continued downturn, providing steady returns via dividends.
Best Bear Market Stocks: Becton Dickinson (BDX)
A manufacturer of medical devices, instruments, and supplies, Becton Dickinson (NYSE:BDX) is a high-quality business that’s recession-resistant. The company’s shares are a great choice for investors seeking both yield and steady price appreciation over time.
Today, BDX stock has a forward dividend yield of 1.51%. That may not sound high, yet it’s important to note that BDX has a 49-year track record of dividend growth. Over the past five years, this dividend aristocrat has raised its payout by an average of 3.84% annually.
Trading for around 20 times forward earnings, Becton Dickinson sports a reasonable valuation. In the years ahead, the stock could climb higher in tandem with earnings growth. Sell-side forecasts call for BDX to report earnings per share (EPS) of $11.93 in FY 2023 (fiscal year ending September 2023), $13.29 in FY 2024, and $14.70 per share in FY 2025.
Dollar General (DG)
As one would expect, Dollar General (NYSE:DG) is thriving right now, amidst the challenging conditions currently at play in the U.S. economy. High inflation and the economic downturn have been a tailwind, not a headwind, for the dollar store retailer.
Like its peers, the company has experienced increased traffic in its stores throughout 2022, a trend that’s expected to continue through the holiday shopping season. In turn, DG stock has held up well this year, gaining slightly (7.38%). Even better, there’s a strong chance this remains one of the best bear market stocks in 2023.
Per sell-side forecasts, earnings are expected to grow by around 10% next fiscal year. With this continued growth, DG could keep climbing. Coupled with its 0.87% dividend (which has grown by double-digits annually over the past five years), this discount retailer could deliver solid total returns over the next twelve months.
Best Bear Market Stocks: Kroger (KR)
Shares in grocery chain operator Kroger (NYSE:KR) have been somewhat volatile, but while the stock has pulled back since April, it’s still up by high single-digits year-to-date. A big factor in this has been the company’s ability to stay one step ahead of inflationary pressure.
Passing along rising prices to the consumer, Kroger has continued to deliver earnings ahead of expectations during this time of high inflation. According to one analyst (Evercore ISI’s Michael Montani), who upgraded KR stock earlier this month, high inflation could continue to be a catalyst for the stock.
As you may have heard, Kroger plans to merge with Albertsons Companies (NYSE:ACI), another major name in the grocery store space. The proposed deal has sparked political controversy and that may be putting pressure on shares at present. However, if the deal goes through, benefits stemming from the merger could become another needle-mover for KR stock.
Pharmaceutical and healthcare productions distributor McKesson (NYSE:MCK) has knocked it out of the park in terms of price appreciation during 2022. Since January, shares have zoomed nearly 54% higher. Admittedly, much of this has to do with a one-time event.
That would be the settling of litigation related to the U.S. opioid crisis. As InvestorPlace’s Will Ashworth discussed in October, these legal settlements have eased concerns about opioid-related liabilities, a factor weighing on MCK stock for several years. Yet while this catalyst has likely finished playing out, you may want to still buy and/or hold onto shares.
Another high double-digit rally may not be in the cards, the recession-resistant nature of its business, plus the stock’s valuation (15.5 times forward earnings) could compel more investors to buy into it as a “safe harbor” play. This could result in satisfactory gains for MCK in 2023.
Best Bear Market Stocks: Philip Morris International (PM)
Controversy notwithstanding, tobacco stocks make for great investments during a bear market. Philip Morris International (NYSE:PM) isn’t the only great choice out there for investors looking for value, stability, and yield, and have no qualms about investing in so-called “sin stocks.”
Yet if you’re also looking for growth, PM stock may be a better option than, say, Altria Group (NYSE:MO), PM’s former corporate parent. While MO may sell at a lower earnings multiple (9.5 versus 17.2) and offer a higher dividend yield (8.21% versus 5.19%), PM is better positioned to thrive in a “post-smoking” world.
Between its recently-closed deal for non-cigarette tobacco/nicotine products maker Swedish Match (OTCMKTS:SWMAF), and the success of its IQOS heated tobacco device product, Philip Morris International could deliver a far greater level of earnings/dividend growth in the long term, while Altria’s “smoke-free” efforts remain at the development stage.
Raytheon Technologies (RTX)
This year’s high level of geopolitical volatility has kept Raytheon Technologies (NYSE:RTX), along with other defense industry stocks, in the green during this down year for the stock market. Shares in this defense contractor are up 12% year-to-date, as the Russia/Ukraine crisis has bolstered demand for military hardware.
With little end in sight for this conflict, this trend will likely carry on into next year. That’s not all. RTX stock could be boosted next year, by the continued recovery of the company’s commercial aerospace unit. At least, that’s the view of Cowen analyst Cai von Rumohr, who recently called this stock a top growth story in the aerospace/defense space.
One of 2022’s best bear market stocks, this could prove to be the case as well in 2023. Along with the prospect of gaining further earnings growth, RTX also has a forward dividend yield of 2.26%.
Best Bear Market Stocks: UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) has long been a top-performing growth stock, and in the past year has proved to be a high-quality stock to buy and hold during a bear market. While major indices are still in the red, shares in this health insurance/health care services colossus have stayed in the green.
This steady performance is likely to continue for UNH stock, even if stocks stay in a bear market through 2023. Not only that, UNH offers a dividend that, while relatively low-yield (1.25%), has increased by a total of 161.9% over the past five years, and has ample room to move higher.
Although UnitedHealth Group may appear pricey, at 25.9 times earnings, the prospect of continued double-digit earnings growth helps to justify this multiple. Along with steady dividend growth, UNH could continue to deliver steady gains for investors, in both bull and bear markets.
At the date of publication, Thomas Niel held a LONG position in MO stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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