After nearly a decade of impressive gains across all three major stock indexes, investors are understandably starting to get a little bit nervous about where the market is headed. After all, share prices can’t continue to rise indefinitely … can they? Many analysts are predicting that the bears will have their reckoning next year, but it’s also important to note that pulling out of the market completely comes with its own set of risks — we’ve been wringing our hands about a major pullback for years now and it’s never actually materialized.
However, that doesn’t mean you shouldn’t take analysts’ warnings to heart.
Now is an excellent time to re-evaluate your holdings and take profits in order to stockpile some cash in the event that a pull-back does eventually come. It’s also a good time to load your portfolio with defensive stocks that will still benefit from the market’s bull run, but are unlikely to tank if the market takes a nosedive.
Here’s a look at three stocks to invest in to prepare for the dreaded bear market.
Value Pick: Coca-Cola (KO)
In a market that’s soaring to fresh highs, the best thing you can do is look for stocks to invest in that have fallen out of favor among investors, making their valuations much more reasonable. Coca-Cola (NYSE:KO) is one such company whose share price has been stuck in the mid-$40’s for years. While the beverage company isn’t delivering the attractive gains that companies like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are, it’s a good pillar to lean on in times of trouble.
For one, KO stock is a relatively stable consumer products company that looks unlikely to go under anytime soon. The company’s name recognition and massive portfolio of brands makes it a relatively safe bet even in the event of a recession.
Another reason you want to have KO in your portfolio should the market take a turn is the company’s reliable 3.5% dividend yield, which will continue to deliver even when the market is down.
Recession Buster: Duke Energy (DUK)
Another way to prepare for a market downturn is to arm yourself with companies that can make money no matter what. The bull run has made utility companies unpopular among investors, but it’s utilities will be popular stocks to invest in if things take a turn for the worst.
Duke Energy (NYSE:DUK) is one of the nation’s top utility companies and the fact that its operations are largely regulated makes it a relatively safe bet in times of trouble. Even though DUK stock has underperformed the market this year, the company’s earnings reports show a sound financial base that won’t be shaken in a recession.
Plus, it’s a great income stock, delivering a 4.6% dividend yield that will help boost your portfolio in the event of a bear market.
All Around Good stock to Invest In: Kraft Heinz (KHC)
When picking stocks to invest in for a bear market, there are a lot of avenues to take — stocks that have been beaten down, consumer staples stocks whose products will still be in demand come a recession and, of course, dividend stocks that will bolster their earnings with reliable payments. Kraft Heinz (NYSE:KHC) is one such company that pretty much meets all of that criteria. The firm’s share price is down nearly 25% so far this year, making it a bargain even in today’s inflated market.
KHC is the fifth-largest food and beverage company in the world with a brand portfolio that houses some of the most iconic names in the business. That kind of size is a huge asset in times of recession because people are unlikely to make major changes to their normal grocery buying habits. On top of that, the firm offers a 4.3% dividend yield which will help ease the pain in a tumultuous market.
It’s worth noting that KHC has some debt issues that make it a little riskier than some of its peers, however it looks like the firm has a plan in place to turn things around through a strategic acquisition that will help the company get its finances back under control.
As of this writing, Laura Hoy was long AMZN and NFLX.