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I'm Buying These 3 Resilient Stocks During the Bear Market

By Danny Vena - May 24, 2021 at 8:04AM

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These companies showed their mettle during the most recent downturn, making them solid buys for any future bear market.

Volatility has been plentiful in recent months, leading some to conclude we're on the verge of another bear market. A pessimistic as things may seem, the truth is that the S&P 500 is still near all-time highs, while the tech-heavy Nasdaq is down just 5%. Since it takes a 20% decline from recent highs before we enter bear market territory, we still have a long way to go.

That said, it pays to be prepared. One way to do that is having a shopping list on hand for the stock market crash, ready to press the buy button. When the next bear market hits, I'll be looking for resilient stocks that can stand the test of time. Buying a company with a virtually unshakable business, an industry leader with a dedicated fan base, or one with a vault chock-full of intellectual property would all be smart moves.

Let's look at three companies that fit these criteria and why they have a prominent place on my buy list.

Bear walking on city street in New York.

Image source: Getty Images.

A love affair with coffee

Americans love their coffee. A whopping 62% of U.S. adults drink coffee every day, and the average coffee drinker downs more than three cups per day.  One of the biggest beneficiaries of this love affair is Starbucks (SBUX 0.17%).

The coffee purveyor was the canary in the coal mine and was among the first stocks to take in on the chin at the start of the pandemic. During a six-week period between February and March 2020, Starbucks lost more than one-third of its value. Yet even the specter of the pandemic couldn't keep the company down, which quickly pivoted to leverage its mobile app to become a hub for takeout and delivery orders to keep Starbucks afloat. The company slashed discretionary spending, suspended share repurchases, and deferred capital expenditures. 

Now, just a year later, Starbucks is enjoying a full-scale recovery of its business in the U.S. and is better positioned to thrive as the world begins to reopen. Net revenue grew 11% in the second quarter, driven by a 15% jump in global comparable-store sales. While transactions edged lower, there was a 19% increase in the average ticket. At the same time, net income and earnings per share doubled, though that was partly the result of easier comps. The Starbucks Rewards loyalty program continues to attract converts, up 18% year over year to nearly 23 million. 

This is the type of resilience I want to see in my investments. Coffee lovers simply aren't going to give up their daily fix of caffeine, and it's little luxuries like Starbucks that will keep people coming, even unto the next bear market.

The iPhone 12 and the iPhone 12 mini side by side.

Image source: Apple.

The Apple of my eye

Another company that showed an unexpected amount of resilience during the most recent bear market was Apple (AAPL -0.41%). Many market prognosticators were forecasting the worst for the iPhone maker, but the company held up remarkably well.

Like Starbucks, Apple was forced to close various retail locations as the pandemic ramped up, until it eventually had to shutter them all. There were a number of staggered store openings and closings, as Apple followed state and local health guidelines to inform its decisions. It wasn't until this March that the company was finally able to reopen all its retail locations, after nearly a year of scattered closures.

Apple certainly faced headwinds, but at the worst point during the bear market, the company still generated growth. Consumers turned to e-commerce in droves, using its online store to get their fix of Apple products. Revenue during its fiscal 2020 second quarter edged 1% higher -- a remarkable feat for a company that generated more than $58 billion in sales. Earnings per share also crept higher, climbing 4%, though that was largely the result of its ongoing program of share buybacks. 

Nothing illustrates the strength of Apple's rebound, however, than this year's second-quarter results. Revenue grew 54% year over year to a new March quarter record, while services and Mac revenue hit a new all-time high. At the same time, net income more than doubled. 

During last year's bear market, U.S. unemployment spiked to the highest level on record since the government began collecting data in 1948. Yet Apple's wide variety of products and price points, coupled with the recurring subscriptions in its services segment, helped the company generate growth through the economic uncertainty. That's why Apple will be on my buy list for any future bear markets.

Disney's Pixar Pier at Night.

Disney California Adventure's Pixar Pier at night. Image source: author.

The Happiest Place on Earth

If there was one company that was the poster child for challenges during last year's bear market, it was Disney (DIS 0.77%). While many businesses were affected by the pandemic, two of Disney's biggest moneymakers were hobbled by the shutdowns: theme parks and blockbusters. Yet it was the diversity of its businesses that helped the House of Mouse stay afloat in one of the most unprecedented bear markets in history.

Investors took solace in the company's recently launched streaming service, Disney+, which quickly ramped up operations. The service added more than 100 million subscribers in just over a year, cutting Netflix's streaming subscriber lead by half. At the same time, Disney's broadcast and cable networks helped keep many of the homebound entertained during the lockdowns.

That's not to minimize the temporary damage inflicted on Disney's financial statements. In fact, of the three recommendations, the media giant was the hardest hit. During its 2021 fiscal second quarter, ended April 3, revenue was down 13% year over year, while segment operating income inched up just 2%.  While that seem dismal, it's a significant improvement from the height of the pandemic, when revenue dropped 42% year over year, and segment operating income plunged 72%. 

It's important to note that Disneyland Park and California Adventure finally reopened their turnstiles just three weeks ago and movie theaters have yet to show their first blockbuster. This illustrates that Disney is already rebounding -- even without some of its strongest assets.

The recent addition of Disney+ should help support the House of Mouse through future bear markets, which aren't likely to have shuttered theme parks and movie theaters. Rather, it's likely that Disney will be more resilient than ever before.

Danny Vena owns shares of Apple, Netflix, Starbucks, and Walt Disney. The Motley Fool owns shares of and recommends Apple, Netflix, Starbucks, and Walt Disney. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple, short July 2021 $120 calls on Starbucks, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$125.22 (0.77%) $0.96
Apple Inc. Stock Quote
Apple Inc.
AAPL
$172.49 (-0.41%) $0.70
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$89.31 (0.17%) $0.15
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$246.56 (-1.02%) $-2.55
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$13,072.97 (-0.42%) $-55.08
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,297.90 (0.02%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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