Three days ago, the S&P 500 officially descended into bear market territory. As InvestorPlace writer Shrey Dua reported, this reflects a 20% drop from its all-time highest point. This is the second time since the first Covid-19 outbreak of 2020 that U.S. markets have dipped so low. As markets tumble, concern among investors persists regarding the Russian invasion of Ukraine and further interest rate hikes. But through all the turbulence, it’s important to identify the best stocks to buy in a bear market.
Conditions and headlines are frightening now, but it is important for investors to take a macro perspective. When stocks plunged in March 2020, the global economic landscape looked even worse. But a few companies emerged as pandemic-era winners and generated tremendous returns, such as Zoom (NYSE:ZM) and Peloton (NASDAQ:PTON).
Now, the latest bear market is about to give rise to another class of winners. Even as high-growth tech stocks plunge and crypto prices hit rock bottom, there are still opportunities to look for. Let’s take an in-depth look at the names to watch.
|Advanced Micro Devices||$85.42|
|AWK||American Water Works||$132.04|
|PG||Procter & Gamble||$132.86|
Advanced Micro Devices (AMD)
When investor focus is on Advanced Micro Devices (NASDAQ:AMD), it’s because of the stock’s long-term growth potential. This semiconductor producer surged in 2021 and early 2022 as demand for its products skyrocketed. While shares have fallen in recent months, AMD stock has plenty to recommend it. The company has a reach across several areas of the tech sector that are booming right now, from electric vehicles (EVs) to metaverse gaming devices.
Additionally, the company has been working hard to stay ahead of its competitors. InvestorPlace contributor Muslim Farooque noted recently, “AMD’s recent product offerings and acquisitions have helped generate substantial cash flows in the past three years. For instance, it made a negative $142 million in free cash flows in 2018, which jumped to $3.14 billion last year.”
AMD was also ranked as a top performer during rate hike periods by CNBC, beating out many financial institutions.
American Water Works (AWK)
In times of economic uncertainty, consumer staple stocks tend to be a safe bet. What commodity is safer to bet on than water? American Water Works (NYSE:AWK) is a leader in the water and water waste fields, providing services that consumers will always need. Its area is a rare field that can grow in both good and bad times.
As Farooque reports, “The thesis behind investing in AWK is straightforward. The services it offers are a necessity, and its business will continue to flourish with rate hikes and a steady increase in population growth rates.”
Indeed, American Water Works is the largest company in its space, serving 14 million people across 24 states. That adds up to roughly 3.4 million active customers. InvestorPlace contributor Josh Enomoto notes that AWK “should easily qualify as one of the safe stocks to buy for solid returns.” By that logic, it is absolutely one of the best stocks to buy in a bear market.
Intuitive Surgical (ISRG)
Another relatively safe sector in uncertain times is healthcare. At the front of the booming healthcare technology sector is Intuitive Surgical (NASDAQ:ISRG). This innovative company is aptly named. It develops and produces robotic devices designed to improve surgical operations. The company has a market share of roughly 80% in a field that continues to expand.
InvestorPlace contributor Tezcan Gecgil has named ISRG as a top defensive growth stock to buy in a turbulent economy. One reason for her bullish take is that a product set like Intuitive’s Da Vinci surgical systems is expensive enough to give hospitals plenty of incentive to commit to it. “A hospital would face high switching costs to move to a competitor,” she notes. “Therefore, Wall Street is not expecting a decline in the number of clients that Intuitive has.”
The trend of artificial intelligence (AI) in surgical operations has been growing steadily and it shows no signs of stopping. Forbes has reported it will dominate hospitals by 2024. Regardless of how markets perform, ISRG stock is a sector leader that will keep growing as demand increases.
Campbell Soup (CPB)
One of the U.S.’s most popular consumer staples is Campbell Soup (NYSE:CPB). The red cans are as iconic as Coca-Cola (NYSE:KO) and they can be stored for several months. InvestorPlace contributor Nicolas Chahine describes it as “a strong hedge to tough equity market conditions.”
Chahine’s description is appropriate. Campbell is nothing if not stable. Its financials are not exciting, but they show the company can remain steady in both bull and bear markets. Year-to-date, the stock is up 4% and has risen throughout 2022 as economic conditions have worsened.
As consumers continue to panic buy, they will turn to the brands they trust. Campbell products are non-perishable and cheap to purchase. Everything about it appeals to nervous consumers who are worried about shortages at the grocery store. If investors want to put their money into a stock they can rely on that won’t dip too far, CPB shouldn’t be ignored.
NextEra Energy (NEE)
Alternative energy has been a good bet since before the U.S. entered a bear market. The Russian invasion of Ukraine has led to oil prices rising across the globe, causing governments to prioritize energy independence. This makes clean energy producers a fairly sage hedge as uncertainty clouds the big oil sector. NextEra Energy (NYSE:NEE) is a dynamic company with a reach across multiple facets of the green energy space.
NextEra claims to “generate more wind and solar energy than any other company in the world.” As Farooque notes, these prominent holdings have helped push NextEra to the top of the utility production field.
It doesn’t stop there. The company has also expanded into the growing space of EV charging, focusing not only on individual cars but entire fleets. And as Enomoto reports, “as the world’s largest producer of wind and solar energy, NextEra is already well ahead in a game that many nations suddenly want to play.” Though he rates NEE as a “retirement stock,” its growth potential in a world that needs and wants its products earns it a place among stocks to buy in a bear market.
Procter & Gamble (PG)
Campbell Soup makes a truly iconic consumer staple. But Procter & Gamble (NYSE:PG) has a hand in just about every product that consumers need, particularly in uncertain times. From food and drink to hygiene products and oral care, P&G pretty much provides it all through its extensive brand portfolio. If Campbell’s is a hedge against the bear market, PG stock is an even stronger hedge in the sense that it offers many more products that consumers are certain to panic buy.
If you need proof that PG stock is a good bet, take the word of famed investor Ray Dalio. It is the second-largest holding for Bridgewater Associates, constituting 4.2% of the hedge fund’s portfolio allocation right behind the Vanguard Emerging Markets ETF (NYSEARCA:VWO). As InvestorPlace writer Eddie Pan reports, “Bridgewater purchased 1.63 million shares of PG stock during Q1, increasing its existing position by 31%.”
Teladoc Health (TDOC)
Teladoc Health (NYSE:TDOC) shot to fame during the first Covid-19 outbreak. The public health crisis created a rare opportunity for the on-demand healthcare company. Now, the telehealth sector has become a staple of the healthcare field, and it is growing at an impressive rate.
Despite a difficult first quarter in 2021, Farooque rates TDOC as a top tech stock to buy during the current turbulence. “Teladoc comfortably beat analyst estimates and its bottom-line trended in the right direction,” he notes. “Moreover, it reduced its revenue outlook by less than 6% at the midpoint and expects revenue expansion at around 20%.”
Even as Covid-19 cases subside in the U.S, Americans won’t want to turn their backs on telehealth services. Teledoc became a household name at a time when need for its services was great. Even as markets struggle, it is in a good position to keep rising. InvestorPlace contributor Chris Lau has noted TDOC is a stock “to buy on any dip.” It is certainly on a dip now, but Lau notes its headwinds are temporary.
On the date of publication, Samuel O’Brient did not hold (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.