Please ensure Javascript is enabled for purposes of website accessibility

3 COVID Stocks to Buy in a Bear Market

By Taylor Carmichael, George Budwell, and Patrick Bafuma – Updated Sep 21, 2021 at 9:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If COVID-19 shocks the market again, our trio of Fools suggest that you might want to own shares of Moderna, Regeneron, and Figs.

The last time COVID-19 crashed the market, the stocks you really wanted to own were small biotech companies fighting the virus. What if history repeats itself and COVID-19 spikes the market again? The same stocks might soar higher yet again. Or perhaps the market will veer in another direction, and a different group of stocks will rise to the top.

Our trio of Motley writers offer their best suggestions for stocks to own in a future COVID crash. Here's why our writers like Moderna (MRNA -1.27%)Regeneron (REGN -0.73%), and FIGS (FIGS 9.46%).  

Masked medical professional holds up a small vial of COVID therapy.

image source: Getty Images.

1.) Moderna: Safety through innovation 

George Budwell (Moderna): With a market cap of $173 billion at the time of writing, this therapeutic company and producer of the messenger RNA vaccine is easily one of the most valuable biopharmas in the world. The biotech's stately valuation, however, has recently drawn significant criticism from various analysts and industry insiders.

The main reason is that Moderna has only one approved product on the market with its COVID-19 vaccine, and that product is widely expected to experience a sharp drop off in sales starting as soon as next year. In effect, the company's present valuation appears to reflect a rather enthusiastic take among investors for the future of its mRNA vaccine and drug-development platform rather than its underlying fundamentals or even its near-term outlook. 

To put this valuation issue into the proper context, Wall Street's current consensus estimate has Moderna's shares trading at an astronomical 22.1 times 2023 revenue. Most of the biotech's closest peers, by contrast, trade at under 3 times 2023 estimated sales. This high-flying biotech stock, in turn, doesn't exactly jump off the page as a bastion of safety. But that's where conservative investors might be dead wrong.

The crux of the matter is that Moderna could very well be poised to utterly change the biopharma game with its mRNA platform. The company already has the main components of its next megablockbuster vaccine in the clinic: a customizable, pan-respiratory annual booster vaccine for COVID-19, influenza, and respiratory syncytial virus. And Moderna is rapidly branching out into several other high-value areas such as HIV, immunotherapy, and regenerative medicine. 

Bear market or not, Moderna's stock should continue to perform admirably for the foreseeable future thanks to its laser-like focus on innovation.

2.) A safe COVID stock that's growing like crazy

Taylor Carmichael (Regeneron): Regeneron has been a huge winner for Fools. In fact, it's almost a 10-bagger stock now. Surprisingly, however, the stock has underperformed the market over the last year, which has made the stock incredibly cheap.

REGN Chart

REGN data by YCharts

Regeneron stock has a price-to-earnings (P/E) ratio of 11, which is very low for a biotech company with 50% profit margins and 163% revenue growth rates. Growth investors might be shying away because the company is already very large, with a $69 billion market cap. And many value investors might not be interested because the stock doesn't pay a dividend yet. So maybe Regeneron's stock is falling through the cracks of the stock market, which makes the stock a steal for investors who are paying attention. 

Regeneron has three blockbuster drugs on the market right now, each one pulling in over $1 billion in revenues in the most recent quarter. The company's eye medication, EYLEA, brought in $2.3 billion in revenues in the quarter. And its respiratory drug, Dupixent, added another $1.5 billion to the company's top line in three months. But it's the company's COVID medication, REGEN-COV, that is really rocking right now. It brought in $2.6 billion in the quarter. Without the COVID therapeutic, revenue growth would have been only 22%.  

While vaccination is still the best bet for defeating the virus, it's possible that large numbers of Americans will refuse to be vaccinated. And it might be politically risky to try to mandate vaccination. That's perhaps why the Biden administration recently made a deal to acquire another 1.4 million doses of REGEN-COV, according to The Washington Post. The therapy has been a life-saver, and the federal government has decided to start stocking up on the drug for future needs.

Unlike the vaccines, the antibody cocktail is highly expensive, costing $2,100 a dose. So Regeneron was paid $2.9 billion. And yet the stock market yawned at the news. In fact, the stock price has dropped another 2% over the last week. But sooner or later, Mr. Market will notice how well this company is doing right now. 

3.) A bear market may eat everything except Figs

Patrick Bafuma (FIGS): Should COVID wreak even more havoc and potentially cause another round of lockdowns in the U.S., luxury medical outfit designer Figs may stand to benefit.

COVID-19 has taken a toll on the mental health of some stalwart humans working within the confines of a hospital. Face it, many of us believe in retail therapy, so in a way Figs is treating those who treat us. And there are certainly less healthy options than splurging on a pair of designer scrubs.

The stylish apparel maker may have raised some concerns with a deceleration of revenues in the second quarter, but revenue growth of 58% year over year is nothing to sneeze at for a clothing company. Its aspiration to become a $1 billion-plus net revenue global brand by 2025 only equates to about 35% annual growth. But that's the kind of growth I'll take through any bear market, especially for a company that has only penetrated 3% of a $12 billion U.S. healthcare apparel market and has enviable brand loyalty, with 50% of customers coming back and buying again within 12 months.

Figs is becoming an iconic brand with a loyal following akin to Apple (NASDAQ: AAPL), Tesla (NASDAQ: TSLA), Nike (NKE 1.23%), and Lululemon (LULU 0.01%) -- not shabby company. The athleisurely Lululemon has seen its stock price grow more than 5 times since 2018 despite growing revenues less than 25% annually during the same time frame. Ditto the Just Do It brand, which has seen its share price grow north of 150% since 2018 with less than 20% revenue growth annually since 2018. Both handily beat the S&P's return of about 67% during the same period. So, despite what may look like average projected growth, Figs appears to be lined up to provide market-beating returns over the coming years.

For those who take care of others and wish to embody a look-good, feel-good mentality, Figs is the lifestyle brand of choice. And given the salaries for locum doctors and nurses who accept temporary placements, it seems like there may be quite a bit of disposable income to throw around. The world needs frontline COVID-19 fighters right now, and Figs is outfitting them.

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Lululemon Athletica, Nike, and Tesla. The Motley Fool recommends Moderna Inc. and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Moderna Inc. Stock Quote
Moderna Inc.
$173.15 (-1.27%) $-2.23
Lululemon Athletica Stock Quote
Lululemon Athletica
$363.32 (0.01%) $0.04
Regeneron Pharmaceuticals Stock Quote
Regeneron Pharmaceuticals
$736.08 (-0.73%) $-5.40
Nike Stock Quote
$106.25 (1.23%) $1.29
FIGS, Inc. Stock Quote
FIGS, Inc.
$7.06 (9.46%) $0.61

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.