Storm clouds are gathering over the economy, with challenges like inflation, rising interest rates, and a possible recession wreaking havoc on people's wallets and portfolios. But investors with some cash sitting around might want to use this bear market as an opportunity to bet on quality stocks selling at a discount.

Let's explore why one such stock, Philip Morris International (PM 0.68%), could turn a $5,000 investment into significantly more over the long term. 

A recession-resistant industry

According to a Bloomberg survey of economists in October, the U.S. has a 60% chance of entering a recession in the next 12 months. For most companies, an economic downturn can be catastrophic because consumers will tend to have less disposable income for goods and services. But for a tobacco company like Philip Morris, it's business as usual. 

Tobacco's habit-forming effects mean consumers still purchase it when money is tight. And as an international company, Philip Morris tends to be shielded from challenges in any specific geography. It stands out among tobacco companies because of its aggressive push toward smoke-free tobacco and other products designed to carry less risk than traditional cigarettes.

So far, the efforts are transforming the company's financial statements. 

Solid third-quarter earnings 

Third-quarter earnings highlight its resilience in this challenging environment as well as its transition to new growth drivers. Revenue fell by 1.1% year over year to $8.03 billion because of a sharp decline in shipment volumes to Eastern Europe amid the Russian-Ukrainian war.

But strength in sales of heated tobacco units (HTUs) helped offset those declines. Global shipment volume increased by 0.6% (to around 189.5 million units) driven by a 17.1% increase in HTU shipments compared to a 1.7% decline in cigarettes.

Darts on dollar symbol

Image source: Getty Images.

The increasing share of HTU shipments plays into Philip Morris' long-term strategy. The company expects cigarette smokers (both its own and rivals) to switch to platforms such as Iquos, which releases nicotine by heating instead of burning. This can allow the company to maintain (or even grow) revenue over the long term as consumers become more health-conscious about smoking. 

As of the third quarter, smoke-free products (including HTUs, oral tobacco, and vaporizers) represent 30.1% of Philip Morris' net revenue. 

The company plans to bring that number above 50% by 2025. And to help do that, it has made a buyout offer of $15.7 billion for snus maker Swedish Match (SWMAF). Snus is a type of oral tobacco product. If finalized, the deal would further cut Philip Morris' exposure to cigarettes while giving it access to Swedish Match's vast manufacturing and sales network in the U.S., which can be used to distribute other products such as Iquos in this large and wealthy market.

Big profits and a sustainable dividend 

A $5,000 investment is a lot to risk on a speculative stock with an uncertain future. But Philip Morris doesn't fall into that category. The company is consistently profitable. Management expects 2022 earnings per share to grow by 12% to $6.20 at the high end. And its compelling transition to new reduced-risk products can help it maintain market share in its industry. 

The company has historically returned value to investors through buybacks. In 2021, management authorized a share repurchase program to retire $5 billion to $7 billion worth of stock over the subsequent three years (although this is on hold because of the Swedish Match acquisition). And a dividend yield of 5.6% is icing on the cake.

With solid operational performance and a management team keen to maximize shareholder value, Philip Morris looks like an excellent opportunity to turn a $5,000 investment into significantly more over the long term.