Bear Market Investing: 3 Reasons to Buy Stocks Now

Bear Market Investing: 3 Reasons to Buy Stocks Now

It’s hard to invest with enthusiasm during a bear market. Seeing major indexes down 20% or more from their past high can be intimidating. It’s also difficult to see portfolios in the doldrums — and to watch even some of the strongest stocks struggle.

But one of the worst things you can do during these times is give up on the market. In fact, right now is actually a great time to stay invested — and add to your portfolio. Let’s take a look at three reasons to buy stocks now.

1. Some companies are still winning

Rising inflation and supply chain troubles have been weighing on many businesses. And higher prices also mean consumers are being more careful about how they spend their money.

Still, some companies are managing to deliver even in these tough times. Demand for Coca Cola (KO -0.32%) beverages continue. That’s thanks to brand strength and Coca-Cola’s focus on investing in growth. The company’s global unit case volume climbed 8% in the second quarter. And net revenue advanced 12%, the company said when reporting earnings this week. The beverage giant even raised its annual revenue forecast.

Chipmaker Texas Instruments (TXN 6.65%) is another example of success today. The company beats its second-quarter revenue and earnings per share forecasts. And the key metrics of free cash flow and return on invested capital have generally been on the rise.

Chart showing overall upward trend in Texas Instruments' free cash flow and return on invested capital since 2020.

TXN Free Cash Flow data by YCharts

Today’s economic troubles aren’t over. Coca-Cola, Texas Instruments, and others that have resisted may see tougher times in the months to come. But their resilience so far is a sign they have what it takes to maintain growth — or recover quickly.

As investors, we have the opportunity right now to see exactly which companies manage best during a bear market. Even if their stock prices aren’t soaring today, revenue growth could power long-term gains. So now is the time to identify and get in on these exciting players.

2. Bargain basement prices on top names

This may sound like an ad for the latest sale at your local department store. But it’s actually what is going on today in the stock market. Many companies that have posted earnings and share price gains over time are trading at very low prices right now.

Intuitive Surgical (ISRG 3.94%) is trading for 56 times trailing-12-month earnings. That’s down from 78 earlier this year. And today revenue is at a higher level than it was last fall — when the shares were more expensive.

Chart showing drop in Intuitive Surgical's PE ratio, and fall and rebound in its revenue, in 2022.

ISRG PE Ratio data by YCharts

In the consumer goods space, Nike (NKE 2.53%) is trading for 28 times earnings. That’s compared to about 48 late last year. At the same time, as with Intuitive Surgical, Nike’s revenue is at a higher level today.

Chart showing drop in Nike's PE ratio, and fall and rebound in its revenue, in 2022.

NKE PE Ratio data by YCharts

These are just a couple of examples. There are many others, throughout industries. In some cases, the companies have been hurt by today’s economic headwinds. In others, stocks have fallen along with the market. Many of these companies have great long-term prospects. So, at today’s prices, they represent quite a deal.

3. Plenty of upside ahead — even if declines aren’t over

It’s impossible to time your investments so that you buy at the very lowest price (and sell at the highest). So instead, it’s best to focus on the potential upside over the long term. The stock market always recovers. History shows us that. And history also shows us that strong companies gain over time — even if they suffer during a particular downturn.

I’ll use Nike again as an example. The stock slipped during the coronavirus market crash in 2020. And it’s down 36% so far this year. But Nike shares recovered from the coronavirus crash. And over the past decade, they’ve proven to be a winning investment.

Chart showing overall upward trend in Nike's price since 2014, with recent drop.

NKE data by YCharts

Even if you don’t buy a stock at its very lowest level, if you hold on for at least five years, you’re likely to benefit. You can invest at any point during a bear market — not only at the market bottom.

The stock market may look like scary territory today. But this landscape won’t last forever. And the bear market actually offers you certain opportunities, as mentioned above. If you focus on these points — and on companies’ long-term prospects — you’ll make the right decisions today. And you’re likely to reap the rewards down the road.

Adria Cimino has positions in Nike. The Motley Fool has positions in and recommends Intuitive Surgical, Nike, and Texas Instruments. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

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