Bear markets can be an incredible time to pick up stocks at a bargain. When panic grips Wall Street, even strong businesses with solid balance sheets and tremendous long-term prospects can get taken down with the overall trend. Still, the strongest companies are often the ones that…
come back the fastest once the bear market passes. That makes it important for you to have a plan in place in advance, so that you know where you want to hunt when deals are available.
If you follow this strategy, know that you’re in good company. Bargain hunting during a bear market is a strategy that Warren Buffett has used successfully throughout his investing career. Indeed, he profited handsomely during the financial crisis of 2008 by having both the cash and the wherewithal to buy strong companies while so many others were panicking. With that in mind, here are three stocks that are certainly worth considering for your potential buy list during the next bear market.
1. Buffett’s own bargain-hunting powerhouse
There’s an old saying in business and investing that if you can’t beat them, buy them. With that in mind, what better business to look to potentially buy at a bargain price than Buffett’s own Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B)? After all, there is nobody better at bargain hunting than Buffett, and he is likely training his successors at the company to be able to follow in those footsteps as well.
Although Berkshire Hathaway’s fundamental business and balance sheet are likely always going to be strong, there’s a good chance that its stock might get knocked down in the next bear market. This is because mark-to-market accounting forces it to record earnings or losses based on the changes in value in its investment portfolio. As a result, if the stocks it owns drop in value, it may have to record an accounting loss, even if the underlying businesses it operates continue to generate cash.
That could cause Berkshire Hathaway to fall during a general market panic, driven by investors and algorithms that don’t look past the headline numbers and into the fundamental health of the company. If that happens, it could very well be the perfect company to buy during a bear market. After all, if it is sweeping up bargains with its cash pile while its own stock is down, then investors who buy its stock could benefit from a rebound when those mark-to-market losses reverse.
2. A tech titan whose products people pay a premium to own
Apple (NASDAQ:AAPL) is well known for being able to charge premium prices for its hardware. That’s wonderful news for shareholders in a strong economy, but it also means that consumers feeling the pinch may choose to hold off on upgrading during tougher economic times. That risk means that Apple could see its stock decline a bit more than otherwise might be expected during a bear market.
Apple has a wonderfully strong balance sheet, with more between cash on hand and receivables than it owes in total debt. That means that it can withstand even a punishing recession and bear market and still have a very strong chance of emerging in good shape.
The challenge with buying Apple’s shares today is that it has a…
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