As the S&P 500 index hovers near the 4,700 level, some investors might think that the early downturn at the start of 2022 was enough to position the market for its next leg up. But other than the brief, pandemic-induced bear market in March 2020, the index hasn't experienced a 20% correction off its highs since the Great Recession of 2008-2009.
While the 2020 drop qualified as a bear market, it came under unusual circumstances and was notably short by historical standards. While one can never predict the next one, bear markets occur every 3.6 years, on average, so it would seem prudent to think about how to plan for that next one. There are good reasons to hold these two stocks for when the next market crash comes.
Image source: Getty Images.
Home Depot can lean on strong market demand
Home improvement retailer Home Depot (HD 0.17%) clearly benefited from the lockdowns resulting from the pandemic. But it had also set itself up beforehand for the dramatic shift in trends that took hold. In 2017, the company announced an $11 billion, multi-year investment program -- called One Home Depot -- intended to build the company's online channels and merge the digital and physical shopping experience for customers.
This had the company well-prepared for the home-repair and improvement spending that soared in 2020. Sales increased nearly 20% that year. But the company wasn't sitting on its laurels. Through the first nine months of 2021, its sales jumped another 15.6% over the prior-year period and net earnings soared over 30%. That came as the company added focus to its professional-contractor business, including its $8 billion acquisition of HD Supply, a provider of maintenance, repair, and operations products.
That focus should continue to drive company growth as the home construction market remains strong. Homebuilder KB Home just reported its full-year 2021 results, telling investors it hasn't seen a slowdown in demand. The company said it expects "a strong spring selling season ahead" and another year of "remarkable growth." Similarly, in its investor call held last month, homebuilder Lennar said it sees a strong housing market across the country and believes pricing should remain robust as "short supply is likely to remain for some time to come."
Home Depot's business will likely see strong results for the foreseeable future, making it a good stock to hold even through the next market crash.
A small plane with Garmin's Autoland technology. Image source: Garmin.
Garmin has loyalty and pricing power
If rising inflation is what leads to the next market correction or bear market, one quality that investors will want in a company is pricing power. Garmin (GRMN -0.29%), a maker of outdoor recreation GPS devices, has that and more.
In recent years, its products have become increasingly popular with runners, boaters, hunters, pilots, and other outdoor enthusiasts. That can be seen in its revenue growth as well as its operating margin. With Garmin stock down some 25% from recent highs, it also looks to be a good time to consider buying its shares.
GRMN revenue (TTM). Data by YCharts. TTM = trailing 12 months.
Garmin ensures continued loyalty by knowing what its customers want. Its Garmin Connect app is a tool for users to track their health and fitness activities -- and it can analyze that data for insights into millions of users in many geographic locations worldwide. Its recently released Garmin Connect fitness report provided a number of noteworthy statistics to be used in updating its devices.
For example, the report said indoor fitness sessions rose 20.5% in 2021 from a year earlier. Pilates and yoga were the leading activities in that category. Outdoor activities also increased by 9.5% with gravel cycling (riding on rough terrain that doesn't require a mountain bike) leading the way, jumping almost 50%. It knows which activities are the most popular in nearly every corner of the globe.
Most importantly for investors, Garmin's products continue to gain popularity. As the company stated in its report, "Fitness activities logged using Garmin smartwatches rose across the board in 2021," including boating, hang gliding, high-intensity interval training, rowing, and rock climbing.
Garmin has a dependable and growing customer base, and the company remains focused on the rising trends in outdoor activities. On top of all that, it also pays a dividend yielding about 2% at its recent share price. Those are ingredients investors should look for in a stock to hold through downturns in the economy or in the stock market.
