Key Points
The broader market, as measured by the S&P 500 (SNPINDEX: ^GSPC), is doing quite well right now, with it within a few percentage points of an all-time high. However, all investors should be prepared for an inevitable bear market, as they tend to occur once every few years. Having a plan in place now ensures that you’ll be ready to act when the time comes, and I’ve already got several stocks pinpointed that I’ll be buying if the market plunges into bear market territory.
Granted, the reason for a bear market could change, which stocks I’m buying, but having a short list and then checking off which ones are in the cross hairs of the bear market is a good plan. If the market enters a bear market, here are the first three stocks I’ll be buying.
Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is a stalwart in the tech industry, and very little can be done to disrupt that fact (outside of major government intervention). Alphabet owns the internet, with its Google Search engine being the primary way to navigate around the internet. This gives it an advertising empire, and it also owns YouTube, the most popular video-sharing website. Alphabet is also a major player in the AI space and is thriving there. Alphabet’s cloud computing platform, Google Cloud, is vital for small businesses around the world, and with how interwoven cloud applications are with modern businesses, severing ties with Google Cloud is nearly impossible.
This leads to a very stable business that can thrive in any downturn. While advertising revenue may see a bit of a recession during a bear market or recession, it tends to come roaring back in a few years. That will make Alphabet an excellent stock to scoop up during a bear market, and it’s one that I think can outlast nearly any storm.
Amazon
Amazon (NASDAQ: AMZN) is in a similar boat for being vital to today’s modern world. Amazon’s commerce business sells and delivers goods to all parts of the world, but it has absolute dominance in the U.S. However, similar to Alphabet, it has a strong cloud computing offering in Amazon Web Services (AWS). AWS is the largest cloud provider, and owns a massive market share that won’t be affected by a downturn. While growth may slow, it’s unlikely for it to retract, making Amazon a relatively stable business to invest in.
People need their goods, and businesses need computing resources. Both of these are safe bets to still occur in a downturn, even if spending is a bit down. Amazon is a low-risk stock that should be scooped up in a recession, as pent-up demand for goods and coupling resources will likely cause Amazon’s growth to skyrocket on the recovery side of a bear market.
Taiwan Semiconductor
Last is Taiwan Semiconductor (NYSE: TSM), and it comes with a major caveat. If China invades mainland Taiwan, and that triggers a bear market, then I’m not buying TSMC stock. However, in nearly every other case, I think it’s a smart buy. Taiwan Semiconductor is the world’s largest chip foundry and is responsible for the vast majority of the logic chips used in high-end technological devices. As the world becomes more digital, demand for TSMC’s chips is only going to rise year after year, and even if the company experiences a dip in demand like the rest of the market, it will eventually emerge on the other side stronger than ever.
Buying best-in-class companies is a smart move during a bear market, and Taiwan Semiconductor has spent the past decade becoming the best chipmaker in the world. Amazon and Alphabet are also great examples of best-in-class businesses, and I think they all make for perfect investments in the next bear market.
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Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
