Four All-Weather Stocks for the Next Bear Market

06/27/2019 5:00 pm EST

Focus: STRATEGIES

Jim Powell

Principal Analyst, Global Changes & Opportunities

I don’t think we are on the verge of a bear market in stocks. However, there are many warning signs that suggest that an economic downturn and a bear market are on the horizon, notes Jim Powell, a growth and income expert, and the editor of Global Changes & Opportunities Report.

Once a bear market begins, prices usually sink rapidly. That’s because fear is a stronger emotion than greed. Fear can turn to panic in an instant whereas greed is usually tempered by caution. Investors who lag behind in a bull market can still make excellent profits. But investors who are caught unawares by a bear market can quickly suffer huge losses.

The only effective way to deal with a bear market is to prepare for it ahead of time. An important point: when a bear market begins and scared investors race for the exits, it is common for all stocks to drop sharply in value — including the stocks of companies that do well during economic downturns.

Once the initial panic is over, investors will push the prices of the “all-weather” stocks back up. Here are several all-weather stocks to consider.

Dollar General Corp. (DG)

One company that should actually benefit from an economic squeeze is Dollar General. That’s because when leaner times arrive, millions of consumers will move at least one step down the retail ladder from affluent stores to discounters — and from discounters to deep discounters. The company has over 15,000 stores located in the South, Southwest, Midwest, and Eastern US.

As its name suggests, everything in a Dollar General store is bargain-priced. The company emphasizes everyday products that people need during both good times and bad. Household cleaners, bath tissue, paper towels, laundry detergent, trash bags, and dozens of personal care products are always stocked.

In addition, Dollar General stocks a wide range of grocery items that most families use – including breakfast cereals, sugar, flour, canned soups, soft drinks, some frozen foods, condiments, and so on. The list includes several fresh foods including milk, eggs, butter, and bread. Most stores also carry beer, wine, and tobacco products.   

On May 30, Dollar General announced excellent first quarter results. Net sales grew 8.3%. Earnings per share grew 9.0%. I think Dollar General will be an excellent stock to own during tough economic times and a bear market.

Zoetis, Inc. (ZTS)

The animal healthcare industry has also been expanding for several years, and offers considerable promise for investors. In addition, the industry is resistant to economic downturns. Even during the Great Recession, pet expenditures increased while nearly every other sector lost ground. Farm animal healthcare dipped a bit, but remained on a high plateau.

The best way to invest in the fast-growing animal healthcare industry is to buy stock in the companies that make the proprietary products that are in high demand. Zoetis looks especially attractive.

The company markets a full range of diagnostic products, vaccines, medicines, and genetic tests for dogs, cats, horses, pigs, beef cattle, dairy cattle, sheep ducks, chickens, geese, and several species of fish used in aquaculture.

In total the company produces over 300 animal health and nutrition products that it markets worldwide. I think Zoetis has what it takes to resist a bear market.

The Walt Disney Company (DIS)

Walt Disney also has a good track record for performing well during all but the toughest economic conditions. That’s because this entertainment icon offers affordable pleasures that are especially popular when times get tough.

The Walt Disney Company needs little introduction. Its operations include the Disney Channel, the ABC TV Network, Freeform, Disney+ (its new streaming service), and the ESPN media network. The company also operates Disneyland, Walt Disney World, Disney Cruise Line, and various theme parks and entertainment operations.

Disney is also a prominent producer of movies, music, and plays through various in-house operations. Of the group, The Walt Disney Studios, MARVEL STUDIOS, Lucasfilm, and PIXAR Animation are the most prolific. Bambi, Peter Pan, Sleeping Beauty, and Alice in Wonderland are among the best known titles – and are still ringing Disney’s cash register.

PPL Corporation (PPL)

Some all-weather stocks pay particularly attractive dividends that can be most welcome during recessions and bear markets when income can be hard to find.

One income producer that looks very good is PPL Corporation — an electric utility holding company with operations in the Northeastern US and the UK. Although utility incomes can decline during weak economic times, they rarely drop very much.

PPL should be a good bear market choice for investors who put reliable income above long-term capital growth. Currently the company pays an attractive 5.25% dividend – which is over twice what Uncle Sam pays on his 10-Year bonds. That’s a lot to like.

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