Rising geopolitical tensions and macroeconomic risks have sent investors frantically searching for bear market stocks. Their main aim is to safeguard against high inflation and volatile markets.
On March 6, Brent crude oil prices soared past $130 a barrel, its highest level in 13 years. Despite a relief rally in the stock markets and a decline of oil below $110 a barrel in the following days, it is difficult to say current troubles are behind us.
Fear and uncertainty adversely affect investors’ moods and pull the markets lower. For example, the Nasdaq 100 Index has declined roughly 16% year-to-date (YTD), while the S&P 500 is down 10% over the same period. So, could the bear be crawling?
Seasoned investors acknowledge bear market stocks tend to perform well regardless of the broader economy. They are often non-cyclical stocks immune to economic setbacks or tightened liquidity. These names typically operate in resilient sectors with stable earnings. Consumer staples, a range of commodities, precious metals, utilities, health care and transportation shares usually get the most attention in bear markets.
Against this backdrop, these seven stocks to buy in a bear market can weather the storm in uncertain times:
- AT&T (NYSE:T)
- Bunge (NYSE:BG)
- Colgate-Palmolive (NYSE:CL)
- Costco Wholesale (NASDAQ:COST)
- United Parcel Service (NYSE:UPS)
- VanEck Agribusiness ETF (NYSEARCA:MOO)
- West Fraser Timber (NYSE:WFG)
Bear Market Stocks: AT&T (T)
52-week range: $22.02 – $33.88
Dividend Yield: 9%
Dallas, Texas-based AT&T is the third-largest wireless carrier stateside. The telecom giant connects roughly 100 million customers through its mobile and broadband services.
The wireless operator expects to generate organic growth from the rollout of 5G infrastructure. For instance, management highlights, “5G is helping bring ‘smart’ hospitals — ones that use technology to make life better for patients and staff — from concept to reality.”
AT&T announced fourth-quarter 2021 results on Jan. 26. Revenue declined 10.4% year-over-year (YOY) to $41 billion. However, net income saw a vast improvement and came in at $5 billion, or 69 cents per diluted share, compared to a net loss of $13.9 billion in the year-ago quarter. Free cash flow stood at $8.7 billion.
In early February, AT&T detailed how it plans to spin off WarnerMedia and merge it with Discovery (NASDAQ:DISCA, NASDAQ:DISCK). Accordingly, investors in T stock should “receive an estimated 0.24 shares of Warner Bros. Discovery (WBD) common stock for each share of AT&T owned.” Meanwhile, the post-close annual dividend of T stock is expected to be $1.11 per share.
AT&T trades for $23 per share, down 23% over the past year. Shares have a cheap valuation at 7.7 times forward earnings and 1 times trailing sales. The 12-month median price forecast for AT&T stock stands at $28.
Bunge (BG)
52-week range: $71.73 – $112.63
Dividend Yield: 1.9%
Chesterfield, Missouri-based agribusiness Bunge operates within the farm-to-consumer food chain. The company has the largest oilseed processing capacity worldwide. As an exporter of soybeans, Bungee is also involved in food processing and grain trading.
The food group enjoys substantial pricing power. Its position at the front end of the supply chain allows the company to pass on any increases in costs to consumers. Meanwhile, management has recently partnered with Chevron (NYSE:CVX) to meet demand for renewable fuels and develop lower-carbon-intensity feedstocks.
Bunge reported Q4 2021 results on Feb. 9. Revenue surged 32% YOY to $16.68 billion. Adjusted net income came in at $533 million, or $3.49 per diluted share, up from $455 million a year ago. Cash and equivalents ended the period at $902 million.
BG stock hit a 52-week high in recent days. It currently trades around $107, up 33% over the past year. Shares are trading at 10.1 times forward earnings and 0.3 times trailing sales. The 12-month median price forecast for Bunge stock is at $117.50.
Bear Market Stocks: Colgate-Palmolive (CL)
52 week range: $73.34 – $85.61
Dividend Yield: 2.6%
Consumer products heavyweight Colgate-Palmolive owns scores of market-leading personal hygiene, household cleaning and pet nutrition brands. Thus, its revenue streams are well protected from most macroeconomic headwinds. The diverse line of products do well regardless of the performance of the broader economy.
Colgate issued Q4 2021 financial results on Jan. 28. Revenue increased 2% YOY to $4.4 billion. However, goodwill and intangible asset impairment charges caused net income to decline to $148 million or 18 cents per diluted share. In the prior-year quarter, net income came in at $647 million. Cash and equivalents ended the period at $832 million.
CL stock offers a 2.6% dividend yield with a payout ratio of 57%. In addition, management has a conservative top-line growth forecast of 3% for 2022.
Shares are hovering around $75, down almost 11% YTD. Valuation stands at 23.4 times forward earnings and 3.8 trailing sales. Meanwhile, the 12-month median price forecast for CL stock stands at $90.
Costco Wholesale (COST)
52-week range: $322.38 – $571.49
Dividend Yield: 0.6%
Membership-only retail giant Costco Wholesale is the fifth-largest retailer in the world. With more than 800 warehouses, it easily leverages its massive scale to purchase large amounts of limited inventory. As a result, management can keep prices down and appeal to more cost-conscious consumers.
Costco announced Q2 FY22 results on March 3. Revenue increased 16% YOY to $50.9 billion. Net income came in at $1.3 billion, or $2.92 per diluted share, up from $951 million in the prior-year quarter. Cash and equivalents ended the quarter at $11.8 billion.
Investors were pleased to hear comparable sales soared 14.7% during the first half of the fiscal year. Costco’s membership program enhances customer loyalty and engagement. In return, annual membership fees help generate consistent profits — a business model the Street prefers. Analysts expect the company to increase its membership fees in 2022, which should result in significant bottom-line growth.
COST stock trades around $536, up nearly 61% over the past 12 months. Yet, it is down about 5% YTD. Shares are trading at 41.5 times forward earnings and 1.1 times trailing sales. The 12-month median price forecast for Costco stock stands at $572.50.
Bear Market Stocks: United Parcel Service (UPS)
52-week range: $158.54 – $233.72
Dividend Yield: 3%
United Parcel Service (UPS) is the largest package delivery company worldwide. With a vast fleet of more than 500 planes and 127,000 vehicles, it delivers around 25 million packages per day.
The logistics giant released Q4 2021 results on Feb. 1. Revenue grew 11.5% YOY to $27.8 billion. Net income came in at $3.1 billion, up 91% YOY and 38% on an adjusted basis. Adjusted diluted earnings of $3.59 per share increased 35% YOY.
UPS recently raised its prices by 5.9% to compensate for higher costs. Thanks to surging e-commerce volumes and increasing demand for shipping services, it finished 2021 with its highest operating margin in 15 years of 13.2%.
Its board recently raised its annual dividend by 49%, supporting a 3% dividend yield. Moreover, the company is forecasting revenue growth of just 4.8% for 2022.
UPS stock trades around $209, up almost 25% over the past year. Shares are trading at 16.4 times forward earnings and 1.9 times trailing sales. Meanwhile, the 12-month median price forecast for UPS stock is at $249.
VanEck Agribusiness ETF (MOO)
52-week range: $84.93 – $99.98
Expense ratio: 0.55% per year
Our next choice is an exchange-traded fund, namely the VanEck Agribusiness ETF. The fund focuses on pure-play agribusiness stocks that generate more than half of their revenues from products like agri-chemicals, fertilizers, seeds, farm equipment, livestock and aquaculture.
MOO, which started trading in August 2007, tracks the MVIS Global Agribusiness Index. It currently has 55 holdings, and the top 10 account for nearly 57% of its $1.2 billion net assets. With regards to subsectors, we see consumer staples at 28.7%, followed by materials at 28% and health care at 22.1%.
Leading holdings on the roster include seed and crop provider Nutrien (NYSE:NTR), equipment manufacturer Deere (NYSE:DE) and medicine, vaccine and diagnostic products manufacturer Bayer (OTCMKTS:BAYRY).
In recent days, MOO stock hit an all-time high. The ETF gained 10% in the last 12 months and is up 2.5% YTD. Given the war in Ukraine and red-hot inflation levels, we could see new highs in many stocks that comprise the fund.
Bear Market Stocks: West Fraser Timber (WFG)
52-week range: $61.36 – $102.61
Dividend Yield: 1.1%
Canada-based West Fraser Timber is a diversified forestry company with global operations. In addition to lumber, it produces plywood, laminated veneer lumber (LVL), medium-density fiberboard (MDF), pulp, newsprint and wood chips.
West Fraser Timber announced Q4 2021 results on Feb. 15. Revenue declined 13.6% YOY to $2.04 billion. Net income came in at $334 million, or $3.13 per diluted share, down from $460 million, or $4.20 per diluted share, a year ago.
Lumber prices remain above prior analyst forecasts. In recent weeks, Chicago lumber futures surpassed $1,400 per thousand board feet. WFG stock has benefited from strong consumer demand for new residential homes. However, soaring costs and supply chain issues are of significant concern.
WFG stock currently trades at $93, up nearly 40% over the past 12 months. Shares are trading at cheap multiples of 5.8 times forward earnings and 1 times trailing sales. The 12-month median price forecast for WFG stock stands at $121.57.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
