Best bear market stocks for January 2022 • Benzinga
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It’s no secret that the past year has been an exceptional one for equity investors. Even a passive investment in a broad stock index like the S&P 500 gained 28.7% including dividends.
Yet no bull market lasts forever.
Read on to learn more about the best stocks in the bear market – where to look for opportunities and how to decide which ones are best.
Bear market stocks to watch this year
Among several sectors, these stocks could help you protect yourself in the event of a bear market:
Walmart Inc. (NYSE: WMT)
|Walmart||$ 143.72||Buy stocks|
Since 1962, Walmart has been one of the essential American brands. Originally known as Wal-Mart Stores, the company has grown from Arkansas across the whole of the United States and beyond. The company operates more than 11,400 stores in 26 countries, focusing on the membership segment (Sam’s Club) and achieving significant growth in e-commerce.
Although the company is trading at a high price / earnings (P / E) ratio (49.1), its growth is expected to outpace that of the industry while its return on capital is above average. In the meantime, he has a strong balance sheet as he has reduced his debt over the past 5 years. Finally, the stock pays a safe dividend of 1.5%, which has increased over the years.
MDU Resource Group Inc. (NYSE: MDU)
|MDU Gr resources||$ 30.36||Buy stocks|
MDU Resources Group has a century-old tradition in the utility industry. First a distributor of electricity, it added natural gas in the 1930s. It has been listed on the New York Stock Exchange since 1948 under the symbol MDU.
Currently, it is trading at a P / E ratio of 15.6, which is well below the industry average (22.9). With a growth forecast of 10.6%, the company should outperform the industry (6.8%). At the same time, it maintains a strong balance sheet and pays a stable dividend of 2.8%.
Medtronic (NYSE: MDT)
|Medtronic||$ 107.63||Buy stocks|
Medtronic is a $ 143 billion company that develops, manufactures and distributes medical devices around the world. Originally based in Minneapolis, after the acquisition of Covidien, it moved its headquarters to Dublin, Ireland.
Right now, with a P / E ratio of 30.4, the company is trading below the industry average of 48.4. Although its growth forecast is poor, the company has a strong balance sheet as it has gradually reduced its debt over the past five years. In addition, it pays a secure dividend of 2.37%, which is well above the industry average (1.3%).
Verizon Communications Inc. (NYSE: VZ)
|Verizon Communications||$ 53.52||Buy stocks|
Verizon Communications Inc. is an American telecommunications conglomerate created in 1984, when Bell Systems split into 7 companies. One of them, Bell Atlantic, was eventually renamed Verizon and became the second largest mobile operator in the United States.
Verizon stock is far from exciting and often comes under criticism due to its sluggish performance. Yet, it’s one of the stocks that often pops up in dividend-related discussions. It is reporting 4.8%, which is below industry standards, but it shines in terms of safety and potential growth.
Schlumberger (NYSE: SLB)
|Schlumberger||$ 36.41||Buy stocks|
Schlumberger Limited is the world’s leading petroleum services company. Originally from France, the company gained a foothold in the United States in 1929. Today it has 86,000 employees and a market capitalization of $ 46.7 billion.
The stock is trading with a P / E ratio of 29.2, slightly lower than the industry average of 31.7. However, he has a brilliant growth forecast of 26.1%. Like many companies in the industry, Schlumberger has increased its debt until 2020 while reducing the dividend. The latter has recovered somewhat since and reports 1.5%.
Snapshot: bear market stocks
While there is no guarantee that history will repeat itself, these sectors have outperformed on market declines in the past:
- Basic consumer products: As the most notable sector during market downturns, consumer staples provide the bulk for which demand is relatively inflexible. You might immediately think of toilet paper hoarding during the decline of 2020, and that is precisely the scenario.
- Utilities: This sector includes companies that provide essential services such as electricity, natural gas or water. Understandably, these relatively stable investments tend to perform well in times of downturn. In addition, this sector displays above average dividend yields.
- Health care: Health is wealth. It therefore remains a priority in the face of economic downturns. The companies that make up the healthcare sector range from drug manufacturers and medical insurers to medical equipment and healthcare facilities.
- Telecom: As the world becomes more and more interconnected, it becomes more and more dependent on communication services. The global pandemic and the subsequent popularization of remote working is the best example of the importance of this sector. The telecommunications sector has historically outperformed most of the downturns, and is posting high average dividend yields.
- Energy: This sector includes companies involved in the production and sale of energy, including companies that deal with fossil fuels, renewable energy and nuclear energy. The energy sector is cyclical during a downturn because it requires a more global vision. For example, during the 2020 downturn, oil futures prices turned negative for the first time in history, while the price of natural gas remained in consolidation.
How to buy bear market stocks
Step 1: Choose a brokerage house.
The easiest and most convenient way to buy a stock is through a brokerage house, a regulated intermediary between you (the investor) and the stock market. Nowadays, you can buy and sell stocks through web platforms and phone apps.
Check out our broker comparison chart below if you are a first-time investor or looking for a new brokerage.
Step 2: Decide how many shares you want.
The number of shares to buy depends on the share price, the size of the portfolio and the risk management strategy. Prices per share may vary, so if you plan to invest fixed amounts
periodically, using a broker that allows the purchase of fractional stocks can be a good idea.
Step 3: Choose your order type.
There are several ways you can instruct your broker to buy stocks. Before investing, you should understand the following basics:
- Market order: The easiest way to trade the market. This order asks your broker to buy or sell stocks immediately, regardless of the price. This is the fastest way, but you might get a slightly lower entry price.
- Limited order: This command only passes to a certain level or better. For example, if the stock is trading at $ 51 and you place an order limit at $ 50.50, it will only execute if the price drops to that level.
- Bid: This amount is the highest price a buyer is willing to pay at the moment.
- Ask: This amount is the lowest price the seller is currently selling at.
- Propagated: This term represents the amount between supply and demand. For example, if the bid for the stock is $ 50.30 and the ask is $ 50.33, then the spread is $ 0.03. A narrow spread is a sign of good market liquidity.
Step 4: Execute your transaction.
Once you have selected and executed the trade, the broker will process the order for you. Check your broker’s statements, which will show that you officially own the shares when the order is filled.
Features to look for in bear market stocks
Consider the following factors when discussing choices for the next market downturn:
- Historical resilience: Sectors behave differently under certain market conditions. Consumer Staples and Utilities have done their best in recent downturns, followed just behind by healthcare and telecommunications.
- Solid balance sheet: Companies that operate in the same industry can be very different. Having a strong balance sheet is one of the best ways for a business to prepare for a downturn. You should look at total debt and its relationship to operating cash flow. The debt-to-equity (D / E) ratio can be useful, but remember that acceptable leverage can vary by industry.
- Quality gains: The numbers may not always be what they seem. Between accounting tips and one-off events, the numbers can be skewed so as not to represent the real situation. Generally Accepted Accounting Principles (GAAP) help clarify the situation, so any discrepancies between them and non-GAAP earnings per share could be a potential red flag.
- Safe dividend: A dividend is a distribution of profits to its shareholders. Typically, mature companies pay a dividend, as growth opportunities tend to shrink. A good dividend combines regularity of payments, opportunity for growth and sustainability.
Preparation in moderation
While you may feel the pressure to make changes in anticipation of a bear market, remember the Wall Street proverb that more money is lost in preparation for recessions than in them. Even though history never repeats itself with precision, it often rhymes well enough to help investors make plans if the markets fall.
While you should be aware that no bull market lasts forever, trying to time its top is as futile as predicting the bottom of the bear market.
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Best bear market stocks for January 2022 • Benzinga
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