It's now official: The longest bull market run in history is over.
On Wednesday, March 11, the Dow Jones Industrial Average ended the day lower by 1,465 points, and with that decline, pushed 20.3% lower than its all-time closing high. With 20% being the official marker of a bear market, the party is over for the 123-year-old index.
While there are a number of factors responsible for pushing the stock market lower, the spread of COVID-19 looks to be the match that lit the flame. This lung-targeting illness has spread to 113 countries, been confirmed in more than 118,000 people, and is directly responsible for nearly 4,300 deaths worldwide, according to the World Health Organization.
Beyond the potential human toll, coronavirus is also inflicting financial pain. Supply chain disruptions in a variety of sectors and industries are threatening to push the U.S. and/or global economy into a recession. It's these fears that have manifested into such a sharp decline in stocks over the past three weeks.
The good news, though, is that bear markets have always opened the door for long-term investors to pick up great companies on the cheap, and this instance will prove no different. Below you'll find five top stocks that you should seriously consider buying during this bear market.
One of the best ways to protect yourself from steep losses during a bear market, as well as set yourself up for steady income when the next bull market arrives, is to consider utility stocks. In particular, NextEra Energy (NEE 0.16%) comes to mind.
NextEra Energy is a leading producer of green energy. No company in the U.S. is currently generating more electricity from solar or wind power, and the exceptionally low interest rate environment provides the perfect impetus for the company to ramp up clean-energy projects. These renewable energy projects, while pricey upfront, are a big reason NextEra's electricity-generation costs are expected to be considerably lower than its peers.
NextEra also benefits from the predictability of power consumption among its customers, and the fact that its traditional electricity-generating operations are regulated. In simple terms, this just means that it isn't exposed to wholesale pricing fluctuations and has a good bead on what to expect in terms of sales and cash flow.
Interestingly, gold-mining stocks have been clobbered as the market has headed lower, likely on some combination of demand concerns from China and margin calls (i.e., investors selling to cover margin calls). But physical gold has been exceptionally strong. This suggests that a high-quality company like SSR Mining (SSRM -2.68%) should be primed for success.
Unlike most mining companies, which piled on the debt in the early 2010s, SSR Mining is run quite conservatively. The company sports a net-cash position of $282.3 million and plans to eliminate $115 million of its $287.8 million in total debt by the end of this month. This gives SSR Mining far more financial flexibility than its peers.
More importantly, its operational improvements at its flagship Marigold mine in Nevada and continued record gold production at the Seabee mine in Canada come at a perfect time, with gold near a seven-year high. The market is overlooking just how much added cash flow these higher gold prices will translate to for SSR Mining moving forward.
If there's one fact you can take to the bank, it's that we don't get to choose when we get sick or what ailments we develop. That makes pharmacy chains like CVS Health (CVS 0.73%) a potentially valuable business to own a stake in no matter how well or poorly the economy is performing.
CVS Health generates a good portion of its margins from its back-end pharmaceuticals, but has been pushing for a more individualized experience to drive foot traffic. CVS plans to open approximately 1,500 HealthHUB health clinics around the U.S. by the end of 2021.
CVS Health is also expected to benefit from its merger with insurer Aetna. Aside from the coronavirus scare reminding Americans of the importance of being insured, the combination of these two companies should lead to significant cost savings in 2020 and beyond. Not to mention, Aetna's organic growth rate is actually a bit higher than CVS' organic pharmaceutical growth. At just nine times forward earnings, I don't see how you can go wrong.
You have to keep in mind that the recent shock to the market is exogenous and has nothing to do with a breakdown in our financial system. That's why buying into semiconductor giant Broadcom (AVGO 1.42%) makes a boatload of sense.
Broadcom will likely be one of the biggest beneficiaries of the ongoing 5G rollout. The company's wireless chips are a mainstay in next-generation smartphones, while its connectivity and access chips are regularly used in data centers that power the cloud. Since smartphones are essentially a basic-need good, a bear market or recession is unlikely to stop consumers from upgrading their devices.
Furthermore, Broadcom has been beastly in the capital return department. Since paying out a $0.07 quarterly dividend in December 2010, it's now grown its payout to $3.25 per quarter. At a projected $13 in dividends for full-year 2020, income investors are scooping up a 5.3% yield for a company capable of growing its sales by the high single digits.
Finally, investors should give strong consideration to adding American Express (AXP 3.14%) to their portfolios on this decline.
While the idea of adding financials, a traditionally cyclical industry, during a bear market and/or recession is often less than palatable, there are two factors to consider here. One, as noted, this isn't the typical financial shock we're used to when the markets turn south. This means that credit delinquency concerns, which usually crop up for lenders when the winds of recession rear their head, probably aren't a big deal this time around.
Second, American Express typically targets more affluent clientele. These well-to-do individuals are less likely to see their spending habits compromised by short-term hiccups like we're experiencing now. With AmEx now going for a little over 10 times next year's forecasted earnings -- a decade low -- it appears time for opportunistic long-term investors to pounce.