While it's nice to see share prices rise after you buy your stake, the reality is that stock prices don't always go up. Bear markets happen, and having the right strategy in place for dealing with one is key to emerging in a better spot once the bear passes. One of the most powerful things you can do is have a list of what companies' shares you'd be willing to buy when the next bear market growls.
When all is said and done, a share of stock is simply a partial ownership stake in a company. What that company is expected to earn in the future -- not what the market thinks right now -- determines what its shares are really worth. The best part of a bear market is that it can knock share prices down to where even great companies can be bought at cheap to reasonable prices.
By keeping an eye out on strong businesses you'd like to buy at bargain prices, you can put yourself in a better spot to be a net buyer of shares when the market is down. With that in mind, here are 3 resilient stocks that are on my list to consider buying during a bear market.
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No. 1: A rock-solid insurance titan
Prudential Financial (PRU -0.61%) cares so much about its financial strength that it uses an actual rock -- the Rock of Gibraltar -- as its corporate logo. It backs that logo up with a balance sheet that contains over $14 billion in cash and $312 billion in bonds available for sale.
As an insurance company, Prudential Financial is in the business of pricing risk. The premiums it charges are available to pay claims against its policies. If the claims it faces are bigger than expected, that balance sheet is there specifically to make up the difference. With a financial buffer that strong, Prudential Financial can face some massive headwinds and still wind up ok.
In addition, while the company was forced to cut its dividend during the financial crisis, it was able to quickly restore them once the crisis passed. Indeed, today's quarterly dividend is larger than its annual dividend was before that cut. That's exactly the type of resiliency I like to see in stocks I'd be willing to buy during a bear market.
No. 2: A business well positioned to care for the aging population
Omega Healthcare Investors (OHI 0.61%) is a company in the business of owning and leasing out properties for long-term care, nursing home, and assisted living facilities. Because America's population is rapidly aging and people in the country are having fewer children than they used to, these types of facilities will likely be in demand for a long time to come.
The aging population means there will likely be more people seeking its services, as older folks are generally more likely to need that type of care than younger ones are. Having fewer children means that there will less likely be a family member able to care for the person needing that help. That makes it more likely that a person who needs that type of support will seek out professional care.
On top of those long-term demographic trends, Omega Healthcare Investors is structured as a Real Estate Investment Trust (REIT). Because of that structure, it must pay out at least 90% of its earnings in the form of a dividend. While the dividend can rise or fall based on the company's earnings, the mandatory payment combined with the demographic trends fueling its business make it high on my wish list.
No. 3: A company that efficiently moves energy around the continent
Enbridge (ENB -1.21%) is the largest energy infrastructure company in North America. It's in the business of moving oil and natural gas from where it's produced to where it's processed and/or consumed, via pipelines. While it's easy to dismiss that business as a bygone relic of "old-school" energy, the reality is that oil and natural gas demand is expected to stay strong for a long time.
Indeed, the US Energy Information Agency projects approximately stable net demand for those fuel types through 2050, even under optimistic assumptions for greener energy sources. That long-term forecast means that Enbridge's large network of energy pipelines will likely see business for at least the next few decades, if not longer.
In addition to being generally large capacity, pipelines tend to be among the safer, environmentally friendlier, and more cost effective ways to move oil and natural gas around. As a result, it is likely that even if oil and natural gas demand does decline over time, pipelines will remain a popular transportation method even as other methods see their usage drop faster. That clear path to longer-term demand makes Enbridge a company whose shares I'd buy during a bear market.
Now is the time to prepare for the next bear market
While it's often difficult to predict when the next bear market will happen, it's pretty much a guarantee that we will face another one at some point. By getting your plans together now, you can be in a better spot when that bear market hits to swoop in and buy when shares are cheap. That makes today a great day to start building your list of resilient stocks you'd be willing to buy when the opportunity arises.
