8 Best Bear Market Stocks to Invest In

Investing in a bear market can be a bit frightening. But it's also necessary to learn how to invest in different market environments -- especially when the broader economic landscape is out of your control. A bear market is a sustained period where prices in the stock market fall by 20% or more from their recent peak. Bear markets are characterized by widespread investor pessimism, market volatility, and often, a decline in economic activity.

When markets fall, many investors run to income-producing assets, stocks included. This means looking for different stocks with a stable cash flow, a history of paying consistent dividends, and participation in "staple" industries.

Investors might also consider stocks that have a competitive advantage or present a lower-cost alternative to some of the pricier service offerings in the space. Here, we'll offer some guidance about potential stocks to buy in the midst of a bear market.

In difficult times for the wider economy, investors look to income-producing stocks to bolster their cash flow and, ideally, smooth out their portfolio returns. As one of the leaders in the oil and natural gas pipeline space, Enterprise Products Partners (EPD +0.55%) appeals to investors for its attractive dividend yield -- currently sitting at around 7%.

Enterprise Products Partners is a master limited partnership (MLP) known for distributing cash to its investors. What's more, Enterprise has increased its payout to investors every year for about 25 years. Oil and natural gas tend to perform well even when certain sectors across the economy may be struggling, since demand for these commodities remains even during an economic downturn.

Note that when you hold MLPs in your portfolio, tax preparation is more difficult. Instead of receiving standard tax forms, you'll receive a Schedule K-1 form outlining any distributions paid out to you during the year. Although the paperwork isn't a dealbreaker for most people, it is something to consider.

2. Mondelez International

Mondelez International (MDLZ +4.82%) is considered one of the world's leading snack companies and part of the consumer staples sector. When a recession looms, people still purchase food at a similar clip and discount foods at an even higher rate. Steady demand for consumer staples tends to make large food producers attractive -- even as discretionary spending is falling in other sectors.

Another common reason people look to stocks like Mondelez is its attractive dividend and cash flow profile. Recessions usually come with bear markets in broad stock indexes; holding stocks with stable (and even rising) dividend yields can make sense for investors who don't have long-run time horizons. Currently, Mondelez pays a stable dividend that yields 3.3%.

3. The Coca-Cola Company

It's difficult to walk outside and not see a sign for a Coca-Cola product. The Coca-Cola Company (KO +2.71%) is another consumer staples favorite that tends to remain stable or do well in times of economic distress.

Over the last few years, the stock has remained steady around the $60 to $70 per share mark, shielding investors from an ugly experience for the broader indexes. At the same time, the company's dividend yields just around 3%, providing cash flow to potentially anxious investors.

Coca-Cola is one of the Dividend Kings, a group of companies that have grown their respective dividends in each of the past 50 or more years. It's no surprise that Coca-Cola stock might be appealing during difficult economic times to keep investors afloat.

4. CVS Health Corporation

When the economy goes south, people still need medications, basic consumer goods, and access to local, reasonably priced medical care. CVS Health Corporation (CVS +0.89%) acts as a one-stop hub for people in local communities and may even reduce primary care visits with its urgent care Minute Clinics.

Recently, an increase in Medicare utilization and rising healthcare costs in the wake of the COVID-19 pandemic have affected CVS' revenue and earnings growth, although the company is still profitable. The company pays a dividend with a yield topping 3%, which has risen as the stock's price has fallen.

6. AbbVie

7. Johnson & Johnson

8. T-Mobile US

Related investing topics

The bottom line on bear market stocks

Again, investing in a bear market isn't meant to be easy. But it's also one of the best ways to invest to build long-term wealth. Staying the course with stable, income-friendly stocks is a way to achieve a seven-figure net worth -- if you do it long enough.

No matter which stocks you end up buying, be sure to maintain a diversified portfolio at all times. Don't put all your eggs in one basket. We can never really know what's coming next, so it's best to cover all your bases to the extent possible.

Take the time to properly evaluate every stock you put in your portfolio and proceed through to the next bear market with confidence.