Image source: Images of Money via PIxabay.
has fully recovered from the drubbing it took at the start of
the year, but that doesn't mean investors should expect nothing
but smooth sailing from here. Bear markets can happen at any
time, so it makes sense to dedicate a portion of your
investment portfolio to stocks that tend to do well during
periods of market turmoil.
Knowing that, we reached out to our team of Motley Fool
contributors and asked them to highlight a stock they think is
a good choice to hold if the market was to drop again. Read
below to see their suggestions.
There are some companies that just don't see their stock price
move. Their revenue streams are extremely constant no matter
the economic conditions, and their competitive advantages are
so strong that new companies rarely try to take them on. A
prime example of this is
(NYSE: WM). Simply put, the business of collecting garbage
isn't one that sees much flux during the booms and busts of the
economy, and the company has
built up a garbage collection and processing
that is extremely difficult -- and expensive -- to replicate.
As a result, the company's stock has never really gone on sale,
even during the financial collapse or the dot-com bust.
Today, Waste Management's stock isn't what you would call
cheap or expensive. If you were to buy it now with a dividend
yield of 2.9%, no one would say you overpaid. At the same time,
you probably won't feel like you're getting a screaming bargain
on the stock, either. However, if you're looking for a company
you can expect to weather any major market drops with
reasonable confidence, then Waste Management is likely a stock
you want to have in your portfolio.
One stock that tends to hold up really well during market
. The company's stock sports a trailing beta of only 0.19,
meaning it doesn't tend to move much in either direction, so if
the market was to take a sudden turn for the worst, you can bet
Wal-Mart's stock wouldn't go down much at all. This is due, at
least in part, to Wal-Mart's status as the low priced retailer
of choice for millions of Americans in good times and bad.
Another factor that should help protect Wal-Mart's investors
from any downside movements is its low valuation. Currently,
Wal-Mart is trading for around 15 times trailing earnings,
which is far below that of the
in general. Wal-Mart also offers up an above-average
dividend yield of 2.87%, which makes it a great choice for
investors who are after income.
Image source: Wal-Mart Stores.
Of course, there are no free lunches in investing, so anyone
who buys Wal-Mart's stock is giving up the possibility for
upside potential in exchange for downside protection. That's
especially true when you consider that Wal-Mart's business is
under tremendous pressure right now from both e-commerce
players and dollar-store retailers, each of which are stealing
customers at both the high and low ends. Mix in the huge
pressure the company is under to increase wages for its
employees, and you can understand why analysts are projecting
that Wal-Mart's profits will be basically be flat for the next
Still, Wal-Mart's investors will bank a good dividend if
they simply buy and hold and the stock, and they won't have to
worry much if the market was to suddenly tank, so this could be
a good choice for investors who prize downside protection above
Evan Niu, CFA
This might be counter-intuitive, but I'm going to go with one
of my favorite income investments:
BlackRock Enhanced Capital and Income
. I've discussed the ETF in previous roundtables related to
dividend or income investments, but CII is also a pretty good
candidate for a defensive play, for a number of reasons.
For starters, CII is mostly an indexed ETF, so it will
certainly follow the broader market lower. However, it pays
such a high yield that if shares fall, the already-strong yield
quickly skyrockets, and long-term investors can get a discount
on a reliable dividend payer. At current prices, CII pays a 9%
yield, which is pretty hard to beat as it is. Since it's a
diversified ETF, I wouldn't worry too much about
company-specific risks since it will follow the market higher
with the rebound, too.
The other reason I think CII is a compelling candidate here
is because of its unique option writing strategy. Part of how
CII pays such a hefty yield is because the fund constantly
writes call options against the broader market, and then uses
the premiums it receives to help fund the payouts. It's
absolutely true that for this reason, CII may underperform in a
strong bull market, since these hedges will limit the upside of
capital appreciation. But in a market downturn, CII enjoys
gains on these short calls, which allows it to outperform in
bear markets. If the market starts to head lower, CII is a
strong defensive pick that just so happens to pay out hefty
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3 Stocks to Own When the Market Starts to
originally appeared on Fool.com.
has no position in any stocks mentioned.
Evan Niu, CFA
, owns shares of BlackRock Capital & Strategies Fn.
owns shares of Waste Management. The Motley Fool owns shares of
Waste Management. Try any of our Foolish newsletter services
free for 30 days
. We Fools may not all hold the same opinions, but we all
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