4 Surefire Stocks to Buy in the Next Bear Market

Are stocks slipping back toward a new bear market? Maybe. Or maybe not. It's impossible to say. The economic news is sending mixed messages. For that matter, so are stocks.

Given the prospect of a return to bear market conditions, though, it wouldn't hurt to at least make some plans for the possibility. Here are four stocks that could not only perform well in a bearish environment, but might actually thrive amid marketwide weakness triggered by economic headwinds.

Altria

It's a cliché, but it's true all the same: So-called "vice" stocks hold up during tough economic times because most consumers don't give up their habits like alcohol, gambling, or tobacco.

Altria Group (NYSE:MO) is in the last of these three business. It's the parent to the cigarette maker Philip Morris USA although it also has exposure to the chewing tobacco and vaping markets through its other subsidiaries. It's also a stakeholder in beer company Anheuser-Busch InBev and cannabis outfit Cronos Group. Its chief moneymaker, however, is cigarettes.

There's no denying it's an industry living on borrowed time. Although its revenue has been fairly flat year over year lately, the company has held the top line that steady despite lower overall sales volume. It's raising prices to offset the impact of its shrinking market.

That's an important detail. Although they're paying higher prices for their cigarettes, most smokers aren't yet willing to quit smoking. Their habit keeps Altria positioned to not only maintain its generous dividend, but able to extend its streak of 57 dividend payout hikes over the course of the past 53 years. The stock's current yield of 8.8% is also higher than most other dividend-paying stocks, and higher than most bond yields right now.

Just bear in mind that while Altria is a great defensive name to own in a bear market, it is likely that it will eventually be out of business. You can't safely hold it forever.

Amgen

Biopharma outfit Amgen (NASDAQ:AMGN) makes and markets more than 20 prescription drugs. Most investors -- including many of Amgen's own shareholders -- would struggle to name a single one of them.

The thing is, Amgen likes it that way. None of its drugs are fast-growing blockbusters of the sort that not only invite tons of competition but suffer steep revenue declines after they lose patent exclusivity. Its two best-selling drugs each only account for around 16% of its sales each, and no other drug provides more than 10% of its revenue.

That doesn't mean every year is better than the last for Amgen. This year's top line is expected to be down a little more than 5% from 2022's sales, for instance, and earnings are forecast to slide by about the same percentage.

Analysts are calling for a rebound next year though, modeling for more than 5% sales growth, which would push earnings per share back to $17.27 from this year's projected $16.76. That growth pace should be maintained through 2025.

Then sales are apt to accelerate slightly following the looming loss of patent protection on several current top-selling prescription drugs that will be met with the launch of new biosimilars from Amgen.

In other words, for Amgen, slow and steady wins the race. Oh, by the way -- Amgen's best-selling product is the rheumatoid arthritis treatment Enbrel.

Procter & Gamble

It's another slow-growth name, but people want the products made by Procter & Gamble (NYSE:PG) regardless of the economic environment. Its resilient demand finds greater favor on Wall Street when more cyclical companies start running into economic headwinds.

P&G is the name behind leading consumer goods brands ranging from Pampers diapers to Tide detergent to Bounty paper towels to Gillette razors. These are brands with loyal followings. Most consumers will continue paying a bit of a premium for the above-average quality they offer even when money is tight.

In this vein, Procter & Gamble was the big winner of 2023's "Most Trusted Products" survey performed by market research outfit BrandSpark International early this year, owning the top name in 23 different product categories. Its Tide brand outright swept all five laundry detergent categories reviewed by BrandSpark.

There's a bullish argument, however, that BrandSpark's poll doesn't outline, and that's the marketing budget that comes with being the biggest name in the consumer staples business. Procter & Gamble is consistently one of the world's biggest advertisers, according to numbers regularly compiled by Ad Age. Its deep pockets allow P&G to maintain what's almost an unfair advantage when its rivals are forced to tighten their marketing belts.

Adobe

Last but not least, add Adobe (NASDAQ:ADBE) to your list of surefire stocks to buy in the event of a bear market.

Surprised? It would be a little surprising if you weren't. This is a business-productivity software company, best known for its Acrobat PDF tools and digital image editor Photoshop. Spending on these sorts of solutions can seemingly dry up when corporate budgets are under pressure.

That's not quite how Adobe works any longer, though -- nor, for that matter, what it is. Yes, Adobe still offers Photoshop, along with a wide array of related image-editing solutions. It doesn't outright sell much software anymore, however. Rather, it rents out cloud-based access to these tools for small monthly fees.

As of last quarter, its digital image and document arm was doing $14.1 billion worth of annualized subscription-based revenue. That's more revenue than this segment did in all of its last fiscal year. It's seeing similar results with its subscription-based business tools that allow businesses to do constructive things with the data they collect when consumers digitally engage with a company.

While it's conceivable that some businesses might cancel their access to such tools as a means of cutting costs, that's not a huge risk should economic weakness up-end the overall market. Adobe's image-editing and data-analysis software often becomes too critical to employees' and businesses' daily functions to simply turn it off.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe. The Motley Fool recommends Amgen and recommends the following options: long January 2024 $420 calls on Adobe and short January 2024 $430 calls on Adobe. The Motley Fool has a disclosure policy.