Stocks may have fought their way back from a bear market since April. But that recovery rally hasn't exactly been convincing. Several economic red flags are still waving, and now there's the potential for escalating conflict in and around the Middle East. The stock market could still be easily upended.
If that's a worry for you, it doesn't necessarily mean you'll need to bail out of the market altogether. However, you'll want to try owning fewer stocks that are especially vulnerable to a bear market, while taking on more exposure to stocks that can stand up to economic weakness and recover reliably once it passes.
The pick of the proverbial litter is arguably beverage behemoth Coca-Cola (KO 1.03%), for several reasons, three of which stand out among the rest.
Demand for its products is resilient in all environments
There's the Coca-Cola you know. That's the company with the world's best-selling soda of the same name, along with its derivatives like Diet Coke, Coke Zero, and Cherry Coke.
Then there's the Coca-Cola you may not know. This is also the company behind Gold Peak tea, Minute Maid juice, Sprite, Powerade, Dasani water, and Powerade, just to name a few. It's got choices for consumers' ever-changing preferences, and can serve all beverage markets ranging from bulk-grocery to convenience stores to foodservice.
NYSE: KO
Key Data Points
That's not quite what makes Coca-Cola stock such a great bear market buy, although it's closely related. Rather, this beverage giant does well in all kinds of markets because its products are so well-loved and frequently used that consumers worldwide don't think twice about buying them -- even when the future is bleak and money may be tight.
For perspective, despite the rampant inflation of the prior couple of years, its total sales volume was up slightly in both 2023 and 2024, while price increases allowed for organic revenue growth of 12% in both years. In other words, consumers and commercial customers willingly paid higher prices for Coca-Cola-made drinks. It's unlikely that a bear market would cause anyone to rethink this affordable indulgence.
It bottles it where it sells it
Although economic weakness and geopolitical trade tensions don't inherently go hand-in-hand, it would be naïve to believe one wouldn't exacerbate the other if either worsened. Companies relying on overseas revenue could be caught up in a trade war in the near future, stymied by tariffs that are largely meant to be punitive, or used as leverage.
That's not a particularly big worry for Coca-Cola, though. There's very little product being made domestically that's being shipped across any border. By and large, Coca-Cola products are bottled where they're sold. The company works with roughly 200 different third-party bottlers that collectively manage about 950 production facilities located all over the world. In countries where its branded beverages aren't made, they're readily supplied by nearby facilities that aren't facing the same steep import/export tariffs most U.S. companies and consumers are suddenly facing.
The only real cross-border concern Coca-Cola faces is the taxation of its profits earned overseas that are repatriated back into the United States, which isn't exactly the worst problem to have.
Image source: Getty Images.
The lingering inflation that could not only help cause a bear market, but worsen because of one, is certainly nothing to dismiss. Just keep the company's business model in mind. Coca-Cola's bottom line is largely linked to the amount of its branded beverages that are consumed, rather than the actual profitability of those packaged products. Most of the cost-based risk here is ultimately borne by its third-party bottling partners and distributors, which cover the bulk of variable expenses like delivery, local promotion, and production.
Coca-Cola is easier to stick with when other stocks fall out of favor
Finally, if you're worried a bear market is now inevitable, buy Coca-Cola stock because its above-average dividend could prove valuable in an environment where almost everything else is underperforming.
Be careful of reading too much into this broad idea. While the idea that growth stocks underperform during bear markets as certain value stocks manage to climb makes superficial sense, most stocks still lose ground during prolonged marketwide sell-offs. There aren't actually any proven safe-haven stocks, including Coca-Cola's, which has often fallen in step with the overall market during each of the last several technical recessions.
Don't lose sight of another way Coca-Cola provides value, regardless of the market. Newcomers will be plugging into a stock with a forward-looking yield of just under 3%, based on a dividend that's now been raised for 63 consecutive years. There's no end in sight to this streak, either.
This cash flow might not fully offset any setback that Coke shares may or may not suffer during and because of a bear market. Obviously, nobody can predict the future. But you can limit your overall risk by owning more stocks of resilient income-generating businesses and scaling back your exposure to more economically vulnerable ones.
That's often enough. Everybody "takes some lumps" during bear markets. You just want to be sure you're fully invested at the beginning of new bull markets, since that's when some of the market's best gains are made. A safer dividend-paying name like Coca-Cola allows you to do this comfortably, even though it's impossible to predict when a new bull market will begin. The fact that the stock also gives you a small chance of logging gains during the bear market itself is just a bonus.
