Investing during a market crash, a correction, or other slumps can be a bit tricky, especially if your main goal isn’t to take advantage of the discounts these downturns offer. You may look for stocks that are either resilient and recover fast after a fall or evergreen businesses that barely register these dips.
And if you are looking for stocks that might be worth buying in a bear market, three should be on your radar.
A food, health, and wellness store chain
Loblaw Companies (TSX: L) is a food and pharmacy giant. It has a network of 2,400 stores and is present in most regional markets. The food segment of the business is composed of 18 major brands, including No Name. There are seven brands under the health and wellness umbrella and a network of over 5,000 professionals.
Both food and pharmacies are evergreen businesses. No matter the economic condition, these people still spend money on food and medicine — the essentials. They also don’t see seasonal downturns.
The result is a financially stable business, which is usually reflected in the stock as well. In the last decade, the Loblaw Companies’ stock has gone up 250% (though not uniformly). Despite its strong post-pandemic growth, the stock is quite modestly valued, an endorsement of its financials keeping up with the stock growth.
A utility company
Utilities like electricity and natural gas are another essential that people don’t stop spending money on, regardless of the economic climate. This makes companies like Fortis (TSX: FTS)(NYSE: FTS) a healthy buy, even when the market is down. While Fortis is not immune to market downturns, it’s a resilient stock that experiences a reasonably fast recovery after market crashes and corrections.
It’s a safe holding for two other reasons, the most prominent of which is its dividend history. The company has been growing its payouts for 48 consecutive years and is one of the only two companies in Canada that are on their way to becoming Dividend Kings in the near future.
The second reason is the stock’s performance. Even though the pace is relatively slow, the stock has been going up for the last 25 years.
A gold stock
Gold is a common choice during market downturns, as the tangible asset tends to hold its value, even in weak markets. This makes stocks like Wheaton Precious Metals (TSX: WPM)(NYSE: WPM) smart buys when the market is down. But there is a difference between a gold stock like Wheaton and evergreen businesses like Loblaw and Fortis.
And the difference is in the consistency of the performance. Wheaton is more of a cyclical stock that only performs well part of the time. And its return potential might actually improve if you hold it short-term and properly “time” your buy and sell.
For example, in the last five years, the stock would have returned you over 170% if you had bought it in July 2017 and sold it at or near the July 2020 peak instead of holding on to it till now, when the total returns are about 85%.
Foolish takeaway
The best reason to invest in a down market is to buy great, usually expensive companies at a discounted rate. Even if you can’t prevent part or all of your portfolio from slumping in a harsh market, you can make up for the losses by leveraging the discounts and undervalued stocks that are commonplace in such markets.
