In this article, we discuss the 14 best bear market stocks to buy now. If you want to see more stocks in this selection, go directly to the 5 Best Bear Market Stocks To Buy Now.
The US economy successfully avoided a recession owing to its resilient job market. However, it’s worth noting that the job market is usually one of the last facets to weaken when interest rates rise. A recurring pattern has emerged in such economic cycles – out of the last nine instances of Federal Reserve rate hikes, seven resulted in an economic recession. The optimism among investors regarding AI’s potential to enhance productivity and drive a new phase of growth played a significant role in the stock market’s recovery from the severe drop experienced in 2022, particularly in the first half of this year. Despite the Federal Reserve’s decision to raise interest rates as a measure to combat inflation, the S&P 500 made an impressive leap of approximately 20%, briefly touching 4600 by the end of July. For Ed Yardeni, the founder of Yardeni Research, this surge was anticipated, albeit arriving “ahead of schedule,” indicating an imminent short-term decline.
On October 1, Yardeni reflected on his earlier analysis, stating, “We concluded that the index might fall to its 200-day moving average, which is currently around 4200.” True to that prediction, since that point, the S&P 500 has indeed experienced a decline of about 7%, reaching around 4,280 by midday on October 2. Yardeni suggests that the index could very well decline further to meet their projected 4,200 mark sometime in October. However, beyond that, he foresees a rebound in the market. In recent months, several economists have revised their growth forecasts for the third-quarter GDP, citing the labor market’s resilience and strong consumer spending. The economic forecasters on the panel at the Federal Reserve Bank of Philadelphia revised their outlook in August, now anticipating real GDP growth of 1.9% at an annual rate for the third quarter. This represents a significant increase from their initial June forecast of just 0.6%.
Most Wall Street investors, however, remain unconvinced by the stock market’s gains in 2023, fearing a potential further retreat due to looming recession risks. This sentiment was revealed in the recent CNBC Delivering Alpha investor survey, which gathered opinions from approximately 300 key figures in finance, including chief investment officers, equity strategists, portfolio managers, and CNBC contributors. The survey, aimed to gauge investor outlooks on the markets for the remainder of 2023 and beyond, revealed that over 60% of respondents view this year’s stock market gain as merely a temporary bounce within a bear market, foreseeing more challenges on the horizon. On the contrary, 39% of investors believe that a new bull market has already begun.
As the year progresses into its latter half, the stock market is already displaying signs of the anticipated recession effects, aligning with J.P. Morgan Research’s predictions. It foresees a gradual economic downturn in the United States by late 2023 due to the cautious approach taken by the Federal Reserve, resulting in stricter credit conditions that will slowly exert downward pressure on economic growth. While numerous stocks are experiencing a downward trajectory, specific industries are thriving amidst this economic strain, making their respective stocks appealing investment prospects for global investors. Some notable sectors include Utilities, Healthcare, Consumer Staples, Communication Services, DIY, and related industries. These stocks generally possess a safeguarded profitability, less susceptible to economic cycle fluctuations and changes in consumer confidence.
Given the situation, investors are actively seeking out top-performing stocks during a bear market to safeguard their investments. Notably, companies such as Berkshire Hathaway Inc. (NYSE:BRK-B), Alphabet Inc. (NASDAQ:GOOG), and Visa Inc. (NYSE:V) are drawing the interest of investors amid the prevailing bearish trend in the markets.
Photo by Adam Nowakowski on Unsplash
Our Methodology
Our list for the best bear market stocks to buy is grounded in hedge fund sentiment towards each stock. These selections are derived from sectors such as consumer staples, utilities, and healthcare, given their historical resilience and stability even during economic downturns. A considerable number of these stocks present enticing annual dividend yields and possess defensive attributes that enable them to maintain stability in a bear market. Additionally, we’ve identified promising tech stocks that currently pose as appealing entry opportunities for investors. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the second quarter of 2023. The list is arranged in ascending order of the number of hedge fund investors in each firm.
14. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
Founded in 1892, The Coca-Cola Company (NYSE:KO) is a multinational American corporation known foremost for manufacturing Coca-Cola. In addition to its renowned flagship beverage, the company is involved in the production, distribution, and promotion of an extensive array of non-alcoholic beverage concentrates, syrups, and, notably, alcoholic beverages within the beverage sector.
During the initial six months of FY23, the company produced $4.6 billion in operating cash flow, with free cash flow amounting to $4 billion for the same duration. This underscores The Coca-Cola Company (NYSE:KO)’s robust cash generation capability, positioning it well to meet its shareholder commitments in the upcoming periods. As of October 2, the company distributes a quarterly dividend of $0.46 per share, yielding 3.35%.
Boasting a track record of consistent dividend increases spanning six decades and a business model resistant to economic downturns, The Coca-Cola Company (NYSE:KO) has garnered heightened attention from both individual and institutional investors. As of the close of the second quarter, 61 hedge funds out of the 910 funds monitored by Insider Monkey held positions in the company. Notably, the most prominent investor was Warren Buffett, often referred to as the Oracle of Omaha, who possessed a substantial $24 billion stake in The Coca-Cola Company (NYSE:KO).
Like Berkshire Hathaway Inc. (NYSE:BRK-B), Alphabet Inc. (NASDAQ:GOOG), and Visa Inc. (NYSE:V), The Coca-Cola Company (NYSE:KO) is one of the best bear market stocks to buy.
13. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 66
CVS Health Corporation (NYSE:CVS) is a U.S.-based healthcare enterprise managing a network of retail pharmacies and clinics throughout the nation. The company oversees various brands, including CVS Pharmacy, CVS Caremark, MinuteClinic, and Omnicare.
CVS Health Corporation (NYSE:CVS) recently released its Q2 outcomes. The adjusted EPS for the quarter stood at $2.21, surpassing expectations by $0.09. Additionally, revenue for the period surged by 10.3% compared to the previous year, amounting to $88.92 billion, exceeding estimates by $2.39 billion. The company currently pays a dividend of $0.60, with a yield of 3.49% as of October 2.
As of the end of the second quarter of 2023, 66 hedge funds in Insider Monkey’s database of 943 hedge funds reported owning stakes in CVS Health Corporation (NYSE:CVS). The most significant stakeholder of CVS Health Corporation (NYSE:CVS) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $398.9 million stake in the company.
Coho Partners Relative Value Equity Fund made the following comment about CVS Health Corporation (NYSE:CVS) in its second quarter 2023 investor letter:
“In December of 2017, CVS Health Corporation (NYSE:CVS) agreed to buy Aetna, which broadened its offering by entering the managed care business. CVS has been moving its portfolio to a more value-based outcome model, and Aetna was a major move in that direction. We were willing to accept the leverage that came with the deal because CVS has a very cash generative model, and we anticipated the free cash flow would enable the company to de-lever fairly quickly.
By mid-2022, CVS was in a position to use the free cash flow that had been going to debt repayment to do bolt-on deals to further prepare for the value-based outcome model and/or return more cash to shareholders in the form of higher dividends or share repurchases. However, CVS lost a “star” in its largest Medicare plan in late 2022 and this will adversely impact earnings in 2024. This was a surprise and disappointment to us, but management should be able to regain the “star” in the back half of 2023, which will then give the company a nice tailwind in 2025…” (Click here to read the full text)
12. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 68
McDonald’s Corporation (NYSE:MCD) is a multinational fast-food chain based in the United States. Established in 1940 by Richard and Maurice McDonald, it initially operated as a restaurant. In the year 2022, the company witnessed a 5% increase in its systemwide sales compared to the previous year, and its global comparable sales rose by 10.9% year-over-year.
Notably, the fast-food giant has maintained an impressive 46-year streak of dividend growth. On July 26, the company declared a quarterly dividend of $1.52 per share, which was consistent with its previous dividend.
At the end of June 2023, 68 hedge funds in Insider Monkey’s database reported having stakes in McDonald’s Corporation (NYSE:MCD), up from 64 in the previous quarter. The consolidated value of these stakes is over $4.2 billion. Ken Griffin’s Citadel Investment Group is among the largest shareholders in McDonald’s Corporation (NYSE:MCD).
11. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
Exxon Mobil Corporation (NYSE:XOM), a prominent American energy firm, is featured in our selection of the best bear market stocks to buy now. The most prominent direct heir of John D. Rockefeller’s Standard Oil, Exxon Mobil Corporation (NYSE:XOM) has undergone an extraordinary evolution over the span of 140 years. Initially established as a local kerosene distributor in the United States, it has now evolved into a global behemoth, standing tall among the leading publicly traded enterprises in the petroleum and petrochemical sectors. Over the last five years, Exxon Mobil Corporation (NYSE: XOM) has seen a remarkable increase of approximately 29%, consistently raising dividends for an impressive streak of 39 years.
The company presently disburses a quarterly dividend amounting to $0.91 per share, resulting in a dividend yield of 3.14% as indicated on October 2. Remarkably, Exxon Mobil has exhibited consistent dividend growth over the past four decades.
As of the conclusion of Q2 2023, data from Insider Monkey’s database revealed that 71 hedge funds had holdings in Exxon Mobil Corporation (NYSE: XOM), a slight reduction from the 73 hedge funds in the preceding quarter. These stakes combined have a total value exceeding $3 billion.
10. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 74
AbbVie Inc. (NYSE:ABBV) functions as a specialized biopharmaceutical firm dedicated to discovering, developing, manufacturing, and marketing drugs tailored to tackle chronic and intricate diseases. The company gained prominence for producing its blockbuster drug Humira, a medication vital in treating moderate-to-severe cases of rheumatoid arthritis and Crohn’s disease.
Displaying an impressive 50-year streak of uninterrupted dividend growth, this American pharmaceutical giant presently provides a dividend yield of 4.02%, as of October 2.
As of the end of Q2 2023, 74 hedge funds tracked by Insider Monkey reported having stakes in AbbVie Inc. (NYSE:ABBV), compared with 75 in the previous quarter. The total value of these stakes is over $2.37 billion.
9. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 74
The Procter & Gamble Company (NYSE:PG) is a multinational corporation specializing in consumer goods, with its headquarters located in Cincinnati, Ohio. Established in 1837 by William Procter and James Gamble, the company offers a wide range of branded consumer packaged goods on a global scale. Its operations span various segments, including Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.
The company provides a quarterly dividend amounting to $0.9407 per share, resulting in a dividend yield of 2.59% as of October 2. Impressively, The Procter & Gamble Company (NYSE:PG) has demonstrated a steady increase in dividends for 67 consecutive years, solidifying its position as one of the top dividend aristocrat stocks on our list.
According to Insider Monkey’s second quarter database, 74 hedge funds were bullish on the Procter & Gamble Company (NYSE:PG), compared to 75 funds in the preceding quarter. Terry Smith’s Fundsmith LLP is the largest stakeholder of the company, with 4.84 million shares valued at $735.8 million.
8. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 81
Walmart Inc. (NYSE:WMT) is an American retail powerhouse with a vast network of hypermarkets, discount department stores, and grocery outlets spread across the United States. The company’s headquarters are situated in Bentonville, Arkansas. The multinational retail corporation has consistently increased its dividends for an impressive 50-year period, presently offering a quarterly dividend of $0.57 per share.
Walmart Inc. (NYSE:WMT) disclosed its Q2 non-GAAP EPS on August 17, revealing a figure of $1.84. This exceeded Wall Street estimates by $0.13. Furthermore, the company’s revenue for the quarter, amounting to $161.63 billion, reflected a 5.9% year-on-year increase, surpassing market expectations by $2.35 billion.
Walmart Inc. (NYSE:WMT) was a popular stock among hedge funds in Q2 2023, with 81 hedge funds held positions in the company, as shown by Insider Monkey’s database. The stakes owned by these hedge funds have a consolidated value of over $5.46 billion. Investment firm D E Shaw proved to be the companies biggest shareholder, with stakes worth approximately $861.9 million.
7. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE: JNJ) is a prominent American multinational corporation established in 1886, renowned for its advancements in medical devices, pharmaceuticals, and consumer packaged goods. Notably, the pharmaceutical division of the company has maintained an impressive 62-year streak of continuous dividend growth. Currently, Johnson & Johnson disburses a quarterly dividend of $1.19 per share, resulting in a dividend yield of 3.06% as of October 2.
In Q2 2023, the count of hedge funds tracked by Insider Monkey holding stakes in Johnson & Johnson (NYSE: JNJ) increased to 88, up from 86 in the preceding quarter. These collective stakes represent a total value surpassing $4..1 billion. The leading hedge fund investor in Johnson & Johnson (NYSE: JNJ) is Ray Dalio’s Bridgewater Associates, boasting a substantial $526.58 million stake.
6. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 90
The Bank of America Corporation (NYSE:BAC) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank caters to individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. The American banking company pays a quarterly dividend of $0.24 per share and has a dividend yield of 3.71%, as of October 2.
On July 18, Bank of America Corporation (NYSE:BAC) announced its Q2 GAAP EPS, which stood at $0.88, surpassing Wall Street estimates by $0.05. Additionally, the revenue for the quarter amounted to $25.2 billion, demonstrating a 2.9% year-over-year increase and surpassing market expectations by $260 million.
According to Insider Monkey’s second quarter database, 90 hedge funds were bullish on Bank of America Corporation (NYSE:BAC), compared to 91 in the prior quarter. Warren Buffett’s Berkshire Hathaway is the top stakeholder of the firm, with close to 1.03 billion shares worth approximately $29.6 billion.
Oakmark Equity and Income Fund made the following comment about Bank of America Corporation (NYSE:BAC) in its second quarter 2023 investor letter:
“Two financial industry companies led the six-month detractors’ list, however. Charles Schwab and Bank of America Corporation (NYSE:BAC) both reported material mark-to-market unrealized losses in their marketable securities holdings, an outcome of the increase in interest rates early in the year.”
In addition to Berkshire Hathaway Inc. (NYSE:BRK-B), Alphabet Inc. (NASDAQ:GOOG), and Visa Inc. (NYSE:V), Bank of America Corporation (NYSE:BAC) is a top bear market stock to look out for.
Click to continue reading and see 5 Best Bear Market Stocks To Buy Now.
Suggested articles:
- 14 Best Dividend Kings Stocks to Buy Now
- 12 Best Bank Stocks To Buy For Long-Term
- 25 Most Interesting Jobs in the World
Disclosure. None. 14 Best Bear Market Stocks To Buy Now is originally published on Insider Monkey.