Bear Market Stocks to Buy Right Now

Bear market stocks can protect your portfolio during a downturn. Companies like Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) are perfect examples.

A brown bear sitting on a rock

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

It appears as if we’re in a full-blown bear market. The coronavirus correction has created some of the most volatile trading days in market history. The oil crisis has deepened the blow. As a major fossil fuel producer, Canada is particularly vulnerable. The loonie recently hit a multi-year low.

But not all investments suffer during a downturn. Bear market stocks can insulate your portfolio from losses without sacrificing long-term upside. These companies can also generate sizable dividends that can supplement your income or provide fresh cash to buy low-priced stocks.

Two of the best bear market stocks are headquartered in Canada. Their advantages are literally built into their business models.

Buy bear market stocks like these

Looking for recession-proof stocks? Check out regulated utilities.

Utilities provide communities with mission-critical services like water, natural gas, and electricity. Without utilities, people wouldn’t be able to heat their homes, run their refrigerators, or have access to water. It’s not surprising that utility demand doesn’t waver much, even if a severe recession hits.

But it gets even better. Utilities are separated into unregulated and rate-regulated businesses.

Unregulated utilities sell their services onto the open market, so pricing fluctuates on a day-to-day basis. If demand surges or competition falters, pricing can go way up. But if demand dips or competition intensifies, pricing can fall off a cliff. Unregulated utilities have high upside but dangerous downside.

Rate-regulated markets enjoy pre-set pricing that is guaranteed by government regulators. No matter where demand goes, pricing remains the same. These prices are often set years in advance, so the utility has extreme visibility into its cash flow generation.

Many utility stocks aren’t strictly rate-regulated, but they sell their power generation on long-term contracts, often spanning decades in length. In everything but name, these companies operate like their rate-regulated peers.

Bargains are everywhere

The best bear market stocks are rate-regulated utilities and utilities that have long-term contracted revenue sources. Two companies meet these criteria.

Algonquin Power & Utilities is a $9.4 billion company that has seen shares rise by 440% over the last decade. This year, shares are down 5% versus a 29% decline for the S&P/TSX Composite Index. Roughly 60% of revenues come from fully regulated sources. The other 40% stem from its renewable portfolio, which is contracted out decades in advance.

All of this results in an incredibly stable business model. Algonquin shares haven’t had a down year for 10 consecutive years. The stock delivers a rock-solid 4.3% dividend and will have no trouble investing for long-term growth throughout the downturn.

As its name suggests, Brookfield Renewable Partners focuses on renewable energy projects. Since 2006, shares have returned 220% versus a meager gain of 15% for the S&P/TSX Composite Index. The company operates hydro, wind, and solar facilities throughout the globe. Many of its projects have 100% contracted cash flows, fueling a reliable 5.4% dividend.

This is one of the strongest bear market stocks because it can grow stronger during a downturn. Brookfield runs an active portfolio, meaning it can monetize assets when prices are high and buy when prices are low.

Before the coronavirus correction began, Brookfield sold $1 billion in mature assets for big gains. It can now redeploy that money into growth projects with fire-sale prices.

The bear market has created many buying opportunities. These bear market stocks can help you protect capital while providing long-term growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Dividend Stocks

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Dividend Income: 2 TSX Stocks to Buy on the Pullback

These TSX stocks look oversold and pay attractive dividends that continue to grow.

Read more »

oil tank at night
Dividend Stocks

1 Top TSX Energy Stocks for Summer 2022

TSX energy stocks have tanked recently, but they could enjoy a nice summer rally. Here's one top stock I'm eyeing…

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Market Correction: 2 Cheap TSX Dividend Stocks to Buy Now for a Self-Directed RRSP

These top TSX dividend stocks look cheap right now for a self-directed RRSP focused on total returns.

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Dividend Stocks That Might Keep Pace With 7.7% Inflation

Three high-yield dividend stocks that might help investors keep pace with Canada’s 40-year-high inflation.

Read more »

value for money
Dividend Stocks

2 Canadian Stocks Trading at Unheard of Prices

Dirt-cheap stocks are a dime a dozen, but a few of them offer you a valuable opportunity, as they trade…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

Is Suncor Stock a Buy Right Now?

Suncor has delivered outsized gains to investors in 2022 and might continue to do so for the rest of the…

Read more »

Canadian stocks are rising
Dividend Stocks

3 Ways to Invest in Canadian Real Estate Under $20

Real estate can be a great way to make passive income, but you certainly don't have to invest a lot…

Read more »

grow dividends
Dividend Stocks

TFSA Wealth: 2 Oversold Canadian Stocks for a Retirement Fund

These top TSX divided stocks look attractive today for TFSA investors.

Read more »