Alarm bells are ringing on Wall Street as rising interest rates and slowing gross domestic product (GDP) growth raise the possibility of a U.S. recession. But with the S&P 500 down 17% to $3,991 year to date, it could be time to bet on quality stocks while they are cheap. Let's explore why Ford Motor (F -3.30%) and Philip Morris (PM -0.65%) could make good buys in this challenging market.

1. Ford Motor

New cars and other big-ticket purchases are often among the first to be postponed during an economic downturn, so Ford faces some pretty serious near-term challenges. That said, the company's rock-bottom valuation leaves little room for a big crash. And its transition to electric vehicles (EVs) will make it a great way to bet on the post-recession economic rebound.

Futuristic car speeding through lights.

Image source: Getty Images.

Analysts at Allied Market Research expect the global EV market to expand at a compound annual growth rate (CAGR) of 23% to $802 billion by 2027 as governments and consumers increasingly prioritize environmental protection. Ford aims to capture this opportunity by investing $50 billion into its EV business to produce two million units annually by 2026. To put that into context, Tesla, the current market leader, produced 930,422 EV units in full-year 2021.

Ford expects its electric business to be twice the size of Tesla's current business in just four years. And Ford's dominant brands like the Mustang and F-150 (America's best-selling vehicle for 40 years) could give the company the edge it needs to make this possible.

With a market cap of $57 billion, Ford trades for just 0.43 times sales compared to Tesla, which trades for 15.8 times sales. This disparity will become increasingly difficult to justify as Ford executes its transition to EVs. And the stock remains a great way for value-focused investors to get exposure to the fast-growing EV opportunity.

2. Philip Morris International 

Unlike Ford, which will be a bet on a potential rebound from a U.S. recession, Philip Morris can outperform during the crisis. That's because tobacco products are habit-forming, and most consumers will keep using them, even in a weak economy. Over the long term, the company's pivot to reduced-risk products will be a sustainable edge over rivals.

First-quarter net revenue increased 2.1% year over year to $7.75 billion, and management expects to grow the top line at an average CAGR of over 5% from 2021 to 2023. Much of this growth will come from reduced-risk products such as IQOS, a system that heats tobacco without burning it to limit the release of harmful chemicals. The reduced-risk transition allows Philip Morris to appeal to an increasingly health-conscious consumer base that might otherwise stop using its products altogether.

Philip Morris's smoke-free products (including oral tobacco and vaporizers) now represent 30% of net revenue. And management expects this number to surge to 50% by 2025. Philip Morris is also boosting its competitive moat with a plan to acquire smokeless tobacco company Swedish Match (known for the Zyn nicotine pouch), which could help it achieve its ambitious long-term goals.

With a market cap of $154 billion, Philip Morris' forward price to earnings (P/S) multiple of 17 is lower than the S&P 500's average of 20. And the company's dividend yield of 5% is icing on the cake.

Timing the market?

It's difficult to time the stock market. And no one knows for sure when this current downturn will end. But whether investors want to buy now or wait a few months for a possible better price, Ford Motor and Philip International look positioned for long-term success. Both companies boast low valuations and have embraced evolving consumer tastes in the automotive and tobacco industries.