It's only a matter of when, not if, the market will crash again. Ignoring for the moment the dramatic plunge that occurred in the first quarter of 2020 at the onset of the coronavirus pandemic, the stock market has been on an incredible years-long tear.
Since the end of the Great Recession in 2009, the benchmark S&P 500 (^GSPC -1.03%) has been an inexorable force on Wall Street, more than quadrupling in value and turning a $10,000 investment into one worth some $42,000.
Yet markets do dip from time to time, and patience is needed for them to recover. Don't expect a straight-line recovery, as there will be hills and valleys along the way -- rebounding from a bear market is a messy affair. But these three stocks stand ready to insulate your portfolio from the worst aspects of a market plunge.
There could not have been a more perfect storm for Disney (DIS -2.21%) than the pandemic, as it affected every aspect of its business. Normally, being diversified across industries offers protection in a downturn, but a near-complete shutdown of almost all global economies is going to hurt no matter what.
Theme parks were shuttered, cruise ships were forbidden to sail, theaters went dark, and advertising was closed off because consumers weren't shopping.
What Disney did have, though, was the power of its brand. Therefore, investors remained so confident in its ability to bounce back once the world reopened that by the end of last year, Disney stock had regained all of the ground it lost to the pandemic, even though the company had only been mostly operational again for a few months.
It was also fortuitous that Disney had launched its Disney+ streaming service just ahead of the COVID-19 outbreak, as people stuck at home turned to the streaming channel, sending its subscriber count above 100 million years ahead of schedule.
Disney now has over 118 million subscribers, and though the market didn't like the seeming slowdown the company has hinted at, there's no way the entertainment giant could have maintained the previous growth trajectory now that out-of-home entertainment options are open to consumers again.
Yet, Disney's theme parks are profitable once again and its other media components -- Hulu, movies, and more -- are back on track, meaning Disney stock is positioned to tackle whatever market crash might come next.
Few businesses were more essential during the pandemic than Amazon.com (AMZN -8.43%), as everyone turned to e-commerce to fulfill the consumer needs they couldn't or wouldn't satisfy at their local shopping mall or grocery store.
eMarketer estimates Amazon will account for 41.4% of all online spending in the U.S. this year. Its share of U.S. retail e-commerce sales will be more than 50% larger than the share of the next nine competitors combined, and Edge by Ascential expects Amazon will nearly double online grocery sales to $26.7 billion in the next five years.
The key to Amazon's amazing retail success has been its Prime subscriber service, which now has 200 million members who come back to its stores time and again to ensure they're reaping the full benefit of their subscriptions. It helps the online giant beat its brick-and-mortar rivals on price while bolstering the razor-thin margins the retail segment is known for.
Still, investors are mindful that the real driver behind Amazon's phenomenal returns is Amazon Web Services (AWS), the cloud infrastructure leader that's on track to generate over $60 billion in annual revenue in 2021 based on its year-to-date performance.
Because cloud-based offerings are still a nascent opportunity for Amazon, AWS is poised to be the key generator of operating cash flow. It's also Amazon's most profitable segment and will do well in both good markets and bad.
Look at Walmart (WMT -1.33%) as the physical embodiment of the digital success Amazon has achieved. Also deemed an essential business during the pandemic, the retail behemoth was allowed to flourish and prosper while many of its rivals were forced to close, sending many into bankruptcy or severely damaging their financial fitness.
While its physical footprint gives it a dominating presence in the retail landscape, Walmart is no slouch when it comes to a digital footprint either. It's on track to generate $67 billion in online sales this year. That may not be the same scale as Amazon, but it's enough to earn second place in the e-commerce market, and in groceries it is the leading online retailer, delivering 48% of all orders.
The retail king is also looking to be a competitive threat to Amazon, with its Walmart+ member loyalty program reaching an estimated 32 million U.S. households in about a year. And Walmart is deploying $14 billion worth of investments into its supply chain and automation to improve efficiency to better compete against its arch e-commerce nemesis.
It may have an unfair advantage over many of its rivals because it has been allowed to profit when others were not, but if there is a market downturn again it's that sort of protected class of business you want in your portfolio.