A Sign of Things to Come?

Did your stocks survive Tuesday's plunge? Yeah, neither did mine.

We aren't alone, at least. Only 13% of NYSE and 9% of Nasdaq stocks finished the day higher, and all 30 Dow Industrial stocks felt the market's wrath as well. Among the few in the green were Marvell Technology (NASDAQ:MRVL) and Brocade (NASDAQ:BRCD).

After Tuesday's drop, investors have to be wondering whether this is a sign of things to come. Following four solid years of market gains, it wouldn't be out of the question for the market to enter a prolonged selling period.

On the other hand, perhaps the markets were so convinced of an impending correction that the confluence of a bad economic report and Chinese market weakness simply led to a self-fulfilling prophecy.

Whatever the case may be, Tuesday's events were certainly a reminder that there is, in fact, risk in the stock market.

Lesson learned
While this might be a great time to reassess your risk exposure, it would be folly to blindly sell off your stocks based solely on yesterday's events.

Although Marvell and Brocade were two exceptions on Tuesday, they show that not all stocks follow general market sentiment.

In fact, during the last bear market from August 2000 to March 2003, where the S&P shed 42% of its value, fully 1,810 stocks posted positive gains.

Among those were:

What's their secret?
The stories behind each company's bear market growth are vastly different. Southern Copper capitalized on the growing global demand for commodities such as copper and zinc, Lennar profited from the expanding U.S. housing market, and Abercrombie continued to rake in cash from teenage shoppers -- a group that never seems to feel the effects of a slowing economy.

But all of them did share something in 2000: free cash flow. In other words, each company was fiscally sound and was generating extra cash by the time the bear market rolled around. This made it much easier for them to go about business as usual during a very hectic time for the U.S. markets.

Bringing it full circle
So while Tuesday's market plunge served as a wake-up call for investors, it shouldn't be seen as a forecast that all stocks are headed downward. Now is a great time to make sure that you're invested in financially sound companies with strong business models and reasonable valuations.

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Todd Wenning's random '90s movie of the day is Mo' Money, starring Damon Wayans. The Fool's disclosure policy believes that a job ain't nothin' but work.