The one good thing about going through a bear market is the bull market that follows. Almost like day following night or the sun coming out after a storm, the stock market always rises after it falls.
It's why for well over 100 years, the Dow Jones Industrial Average has returned about 10%, on average, every year. Despite wars and recessions, pandemics and depressions, the chart of the venerable index continues to climb upward over time.
That doesn't mean those periods when it's down aren't dark and painful, but as the saying goes, it's darkest before the dawn, and investors should understand that this too shall pass. Always being ready to take advantage of such situations is key to creating generational wealth.
And so the following two stocks are ones investors should have on their watchlist to buy if the market falls further.
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1. Amazon.com
The market may be toying with official correction status, but Amazon.com (AMZN 1.30%) is already down in the dumps after reporting a massive $4 billion first-quarter loss back in April, a big reversal from the $8 billion profit it had notched a year ago.
While that had everyone worried the e-commerce giant's growth was coming to an end, it's not what it seemed. Much of the loss was because of Amazon's investment in electric truck maker Rivian, resulting in a pre-tax loss of $7.6 billion as part of its non-operating expenses. The rest of its business remains healthy.
North American retail sales grew nearly 8% (international retail was down 6.2%), and its cloud computing operations were strong, up 37% year over year, and still very profitable. Amazon Web Services was responsible for all of Amazon's $3.7 billion operating profit. It is firmly entrenched in all facets of the economy and will expand with it.
Amazon just completed its 20-for-1 stock split, which brought the stock down to an affordable $114 per share, and while it goes for 41 times next year's earnings estimates, Wall Street still expects the company to be growing profits at a 40% compound annual rate for the next five years. That means Amazon stock is still a "growth stock," and in a slumping market, investors should be ready to pounce.
2. Colgate-Palmolive
Consumer products giant Colgate-Palmolive (CL 0.28%) can withstand the forces of a market downturn because of the depth of its product portfolio. Few companies possess the breadth of products it owns beyond just its Colgate brand of toothpaste and Palmolive brand of dish soap. It also owns Softsoap, Speed Stick deodorant, Murphy oils, Irish Spring soap, Tom's of Maine, and Ajax, as well as numerous brands exclusive to certain international markets.
Typically, Colgate brands occupy the No. 1 or No. 2 spot in the markets they're in, such as pet nutrition products, where its Hill's Pet Nutrition segment is a leading product in over 80 countries worldwide.
This is why Colgate-Palmolive is such a reliable performer. Because hygiene and personal care are essential to everyday life, consumers are not willing to stop buying them no matter how tough times get. And what makes a name brand like Colgate's so valuable is that consumers understand the quality and consistency they'll get when reaching for one of its products on store shelves. So they're willing to not only buy them time and again but to pay up for them too.
For a $66 billion stock in a rather staid business, it's tough to expect meteoric growth anymore. What you're getting instead is a steady grower that also pays a dividend. You can apply its product consistency to its payout as well; Colgate has paid a dividend since 1895 and has increased it every year since 1963. That makes it a Dividend King and a stock you can feel confident about no matter the market.
