30 Top Stocks and Funds to Beat the COVID-19 Bear Market

With the Dow Jones Industrial Average, the Nasdaq Composite Index, and the S&P 500 all down by more than 20% from their recent highs, there's no doubt that the COVID-19 pandemic has pushed U.S. stock markets into bear territory. What's more, the social distancing measures being used to control the spread of the SARS-CoV-2 virus have badly damaged the global economy and global supply chains and have put a number of industries, such as airlines, brick-and-mortar retailers, and sit-down restaurants, in a serious financial bind. 

The good news is that this pandemic will eventually end. Several pharmaceutical companies are trialing a variety of novel therapeutics that could shorten the clinical course of the disease and perhaps lessen its severity in acute cases, leading to fewer fatalities. Moreover, numerous vaccine candidates are under development, some of which could be available for widespread use as soon as mid-2021.

A bear wearing a face mask while confronting a downward trending market.

Image source: Getty Images.

So from an investing perspective, this coronavirus-induced correction should ultimately play out like nearly all other bear markets throughout history. Specifically, bear markets have rarely persisted for periods longer than two years, and most fade away in about 14 months. What this means is that investors willing to buy high-quality equities and hold them for at least five years should come out of this chaotic period in outstanding shape, financially speaking.

Which investing vehicles are the best buys right now? Here's a breakdown of 30 of the most attractively priced exchange-traded funds (ETFs) and individual stocks in the market today.

3 high-quality ETFs

One of the easiest and best ways to invest is by buying ETFs that sport low expense ratios. By doing so, you can gain broad exposure to specific economic sectors, without the hassle of buying dozens of individual stocks. While there are literally hundreds of ETFs to choose from, the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB), the Vanguard Consumer Staples Index Fund ETF Shares (NYSEMKT: VDC), and the Vanguard Information Technology Index Fund ETF Shares (NYSEMKT: VGT) are three of the most highly regarded among passive fund enthusiasts -- and for good reason.

Dice that spell out ETF on a wooden table top, with a hand turning a fourth die from a down red arrow to an up green arrow.

Image source: Getty Images.

The iShares Nasdaq Biotechnology ETF sports an expense ratio of 0.47%, which is reasonable for a top-performing fund. This fund enables investors to take advantage of the red-hot growth in the biotech industry, without the stomach-churning volatility that comes with owning individual biotech stocks. Before this downturn, the iShares Nasdaq Biotechnology ETF was up by more than 300% over the past 10 years. That's well above the returns on capital generated by the major U.S. stock indices during the same period. 

The Vanguard Consumer Staples Index Fund comes with both an ultra-low expense ratio of 0.10% and a noteworthy dividend yield of 2.76%. This fund is composed of numerous defensively oriented blue-chip equities that track the MSCI US Investable Market Index. While the Vanguard Consumer Staples Index Fund underperformed the broader markets during the prior decade, it has also lost significantly less of its value during the current sell-off. Thus, this fund is a great way to collect a healthy dividend and conserve capital in an uncertain market environment.

The Vanguard Information Technology Index Fund is a true gem in the ETF universe. This technology-oriented ETF sports an expense ratio of just 0.10% and an annualized yield of 1.4%, and it generated market-crushing returns for investors over the past 10-year period. What's more, the Vanguard Information Technology Index Fund has so far held up better than every major stock index in 2020.  

12 blue-chip value stocks that pay top-notch dividends

Blue chips are companies with sound balance sheets, proven economic moats, and healthy free cash flows. They frequently make the esteemed list of Dividend Aristocrats, a select group of companies that have increased their dividends for a minimum of 25 consecutive years. As a result, these top-shelf equities and highly coveted passive income generators tend to weather economic downturns fairly well. Here are 12 blue chips worth buying right now. 

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Abbott Laboratories (NYSE: ABT) is a medical device and molecular diagnostic company. The company has raised its dividend for 48 straight years, easily making it a Dividend Aristocrat. Although Abbott's shares are fairly expensive from the perspective of a forward-looking price-to-earnings ratio, the company could benefit enormously from its recently approved COVID-19 molecular diagnostic tests. At a minimum, Abbott should remain an outstanding passive income vehicle, and it should continue to be generally immune to this marketwide downturn because of its top-notch portfolio of essential healthcare products. 

Apple (NASDAQ: AAPL) is one of the largest and most visible tech companies in the world today. Even so, the company's shares have been hit hard this year by the COVID-19 pandemic. That's not surprising in the least, given that Apple has already stated that it will miss Wall Street's financial targets in 2020. This sizable downturn, though, should prove to be a once-in-a-lifetime opportunity to pick up some shares of the tech giant on the cheap. Apple currently offers a modest yield of 1.26%, and Wall Street has the company's average 12-month price target at $310.90 per share. That amounts to a healthy 28.7% upside potential. 

Bristol Myers Squibb (NYSE: BMY) has turned into a juggernaut following its acquisition of Celgene. The company is currently trading at under 3 times forward-looking sales, it offers an above-average dividend yield of 3.26%, and it sports multiple megablockbuster drugs such as Opdivo, Revlimid, and Eliquis. Although nothing is guaranteed in the stock market, Bristol stands a great chance of generating market-beating returns for investors over the next five to 10 years. 

Chevron (NYSE: CVX) is an oil and gas megagiant. Nonetheless, the company's shares have gotten pounded into the dirt this year in response to the ongoing oil war between Russia and OPEC, which has caused crude oil prices to plummet into the low $20s. On the bright side, Chevron has been slashing costs to protect its highly coveted dividend. Now, Chevron may have to rethink its dividend policy if crude oil prices don't rebound fairly soon. The company's yield, after all, currently stands at a jaw-dropping 6.78%. The bigger picture, though, is that Chevron should eventually rebound and should continue to pay a respectable dividend over the long haul.   

JPMorgan Chase (NYSE: JPM) is a titan of the financial-services sector. The bank's shares, however, have lost almost 40% of their value since the start of 2020 over concerns about falling interest rates, along with the potential for a prolonged recession sparked by the ongoing COVID-19 pandemic. While JPMorgan's stock may continue to slump in the coming weeks as the public health crisis deepens, investors should gladly catch this falling knife. JPMorgan has almost $900 billion in cash, it offers a dividend yield of 4.11%, and it's an American institution in many ways. There is no plausible scenario where this top bank stock doesn't recover within the next five years. 

Johnson & Johnson (NYSE: JNJ) is a diversified healthcare behemoth. And the company's Dividend Aristocrat status is well earned thanks to its track record of raising its dividend for nearly 58 straight years. Moreover, J&J is one of only two publicly traded companies with a Standard & Poor's AAA credit rating. J&J's dividend yield isn't exactly anything to write home about, at 2.85%. But the company has a long history of beating the broader markets in terms of total returns on capital , when including its dividend. J&J, in turn, arguably deserves a spot in any type of portfolio.  

McDonald's (NYSE: MCD) is the quintessential American fast-food restaurant. While the company's top-line has been struggling of late because of the influx of numerous competitors and a shift in American eating habits in general, McDonald's was still forecast to see a nice bump in revenue next year before this pandemic took hold. The company's heavy investment in delivery services and new technologies such as self-serve kiosks was expected to be a big boon to its business in 2021 and beyond. Still, McDonald's is a Dividend Aristocrat, it offers a respectable yield of 3.1% at current levels, and it has a decent cash reserve. McDonald's stock is therefore one of the safest passive income plays in this turbulent market right now.  

Pfizer (NYSE: PFE) started off the year on a sour note but has since found its footing as investors flocked to its top-notch dividend yield of 4.62%, strong balance sheet, and above-average near-term outlook. The big draw with this pharma titan is its portfolio of high-growth prescription drugs that includes products such as Vyndaqel, Ibrance, and Xeljanz, combined with the upcoming spinoff of its legacy products business slated for later this year. The bottom line is that Pfizer's days as being one of the worst components of the Dow Jones appear to be drawing to a close.    

Coca-Cola (NYSE: KO) had a historically bad first quarter because of the impact of the coronavirus on restaurant traffic, major sporting events, and large public entertainment events in general. Even now, though, Coca-Cola's stock is anything but cheap, for a variety of reasons. In short, Coca-Cola has been a tremendous cash cow for several generations, and its dividend is a big draw for income investors. At present, Coca-Cola's shares yield a juicy 3.73%, which is well above average for a consumer-staples play. So even though the company's first- and second-quarter earnings are probably going to be downright terrible, this is one blue-chip stock that every investor should want to scoop up on this pullback.    

Clorox (NYSE: CLX) has been a rare bright spot in this dour market. Investors have piled in to Clorox this year, presumably in anticipation of a spike in demand for disinfectants such as Clorox bleach. In 2020, the company's shares have gained a healthy 15.6% because of its tie-in to the coronavirus. The bad news is that Clorox's shares are now trading at close to 28 times earnings, making it one of the most expensive blue-chip stocks on this list. That said, its dividend yield still stands at an attractive 2.36%, and it should remain a red-hot equity as long as the coronavirus maintains a virtual monopoly on the news cycle. 

Walt Disney (NYSE: DIS) is a downright steal at these levels. After a dreadful first quarter, the company's shares are now bumping up against their five-year low and sport a modest dividend yield of 1.81%. Now, the harsh truth is that Disney's theme parks are going to be costly to maintain during the lockdown, and there will be a sharp decline in box office revenue for a good chunk of 2020. That can't be helped in a global pandemic. But Disney is a proven long-term winner because of its outstanding studio entertainment properties such as the Frozen and Star Wars franchises, among many, many others. Bottom line: Disney's stock is almost certainly going to continue to head lower in the weeks ahead, but long-term investors should take definitely advantage of this weakness. This blue-chip stock, after all, will probably post a stunning reversal once this pandemic peters out. 

Verizon Communications (NYSE: VZ) is a telecom giant. The company's shares have fallen by around 11% this year, but that's not too bad considering how poorly the broader markets have performed so far in 2020. Investors seem to be sticking with Verizon in the wake of this downturn because of the company's outstanding dividend yield of 4.45%, leadership in the area of 5G technology, and partnership with Disney revolving around the Disney+ streaming service. Verizon does have one of the weaker balance sheets on this list, and it is facing an increasing amount of competition. But the big picture is that Verizon's shares are simply too cheap at 11.7 times earnings, especially for a company that offers a reliable, above-average dividend. 

2 megacap growth stocks

Megacap companies, or companies with market caps of at least $200 billion, are rarely coveted for their growth prospects. Instead, these towering figures of industry are usually viewed as top-notch passive income vehicles, or capital preservation plays. These two e-commerce titans absolutely demolish this stereotype. 

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Alibaba Group (NYSE: BABA) has been a big winner since its IPO in 2014. The Chinese e-commerce, cloud computing, digital media, and mobile payment megagiant, however, will probably only continue to surge higher in the months and years ahead. The core reason is that Alibaba has invested heavily in new technologies to remain at the cutting edge of its most lucrative markets. Equally as important, China's cloud computing market is expected to see explosive growth over the next decade. Alibaba is thus well positioned to deliver market-beating returns for the foreseeable future, despite its monstrous market cap of $510 billion.  

Amazon.com (NASDAQ: AMZN) has transformed scores of its early shareholders into multimillionaires. Amazon Prime, with its free shipping and online entertainment component, has now attracted over 150 million members, and the company has built out a first-class data management business known as Amazon Web Services. Amazon, in effect, has weaved its way into the heart of American life. So even though the company's market cap stands at a jaw-dropping $949 billion, its stock should still produce healthy gains over the next decade, thanks to its loyal customer base and highly profitable Web services segment. 

3 large-cap growth stocks

Like their megacap counterparts, large-cap equities, defined as companies with market caps of $10 billion or more, tend to attract conservative-minded investors or those seeking a safe dividend. However, these three large-cap stocks are unique in that they are best viewed as top-notch growth stocks. 

A biotech researcher in a lab holds a pipette and test tube in gloved hands.

Image source: Getty Images.

BioMarin Pharmaceutical (NASDAQ: BMRN) is a rare-disease drugmaker with multiple products on the market. So far this year, BioMarin's shares have essentially traded sideways, down 0.4%. The company has been able to swim against the current during this pandemic because many of its patients simply cannot forgo treatment without dire consequences. In addition, BioMarin is closing in on two major regulatory decisions for its next set of product candidates. The main attraction here is that BioMarin's top line could realistically double within five years, and it operates within one of the few segments of the economy that should be basically immune to the COVID-19 pandemic. 

DexCom (NASDAQ: DXCM) is a medical-device company that specializes in diabetes. The company's shares have gained a stately 19% in 2020, thanks to the breakout success of its G6 continuous glucose monitoring (CGM) system. Although DexCom's shares are some of the most expensive within the healthcare sector right now, the company's rich valuation shouldn't scare you away. There are close to half a million adults living with diabetes worldwide, and this number is expected to rise markedly over the next decade. DexCom's CGM franchise is poised to play a critical role in the fight against this raging pandemic, which should translate into some truly eye-catching revenue figures.  

MercadoLibre (NASDAQ: MELI) is the undisputed king of Latin American e-commerce. Even so, the company's shares were battered and bruised last month by the COVID-19 panic. COVID-19 has only recently started to have a major impact in Latin America, and the good news is that it shouldn't have any long-term consequences on MercadoLibre's e-commerce business. Now, the company's near-term sales might take a sizable hit as Latin America enforces shelter-in-place mandates. But this barrier to economic activity won't last forever. Thus, bargain hunters may want to pounce on this beaten-down e-commerce play soon. 

3 mid-cap growth stocks

Investors often overlook mid-cap stocks, or companies with market caps ranging from $2 billion to $10 billion. But they shouldn't. Mid-cap stocks often offer a compelling mix of healthy growth and safety. In fact, mid-cap equities have consistently been some of the best growth vehicles in the entire market for the better part of the past decade. With this theme in mind, here are three mid-cap healthcare stocks that should be outstanding bargains at current levels. 

Image of two hands cusping a minature human liver.

Image source: Getty Images.

Intercept Pharmaceuticals (NASDAQ: ICPT) is a mid-cap biopharma focused on the development of drugs for non-viral liver diseases. The company's shares have lost over half their value this year because of a regulatory delay for its non-alcoholic steatohepatitis (NASH) drug candidate, Ocaliva. Specifically, Ocaliva's advisory committee meeting was moved from April 22 to June 9 of this year as a result of COVID-19. Intercept's shares, in turn, might be one of the best bargains in the entire market right now. While Ocaliva isn't a surefire slam dunk to become the first drug ever approved for NASH, the fact is that it would easily rack up sales in the $2 billion to $3 billion range if it does cross this key regulatory hurdle. The big deal is that Intercept's market cap is currently hovering right around a mere $2 billion at the time of writing. As such, there's a real shot that Intercept's shares could double, or even triple, in value by this time next year.  

Sarepta Therapeutics (NASDAQ: SRPT) is a rare-disease and gene therapy company with a virtual monopoly on treatments for the muscle-wasting disorder known as Duchenne muscular dystrophy (DMD). The company's stock has traded in lockstep with the broader markets this year presumably because of its formerly rich valuation. What's important to understand is that Sarepta's shares are quite possibly trading at less than 0.5 times 2026 sales. There are a lot of moving parts that could drastically change this outlook, but the bottom line is that Sarepta's stock is dirt cheap at these levels. Despite multiple would-be competitors in DMD, after all, Sarepta is still the only game in town for the most part. 

Tandem Diabetes Care (NASDAQ: TNDM) is another high-growth diabetes play, thanks to its outsize portion of the insulin pump market. The company's shares have been on fire over the past three years because of the rapid growth of its market share in the insulin pump space. And in 2020, Tandem's share have even been able to eke out a modest gain of about 3%, which arguably reflects the strong demand for its insulin pumps for individuals with type 1 and type 2 diabetes. Wall Street's current consensus price target implies that Tandem's shares could rise by another 44.9% over the next 12 months. With the diabetes market growing by leaps and bounds, this rosy outlook doesn't seem to be unreasonable in the least. 

3 small-cap growth stocks

Small-cap growth stocks are typically the first group of equities to lose favor in a crisis. These stocks are generally riskier than mid- and large-cap equities. As the market derisks, though, some small-cap stocks become outstanding bargains by default. The following three names fit that description to a T. 

A man drawing an upward trending curve with 2020 at the focal point of the trend's apex.

Image source: Getty Images.

Catalyst Pharmaceuticals (NASDAQ: CPRX) is an orphan-drug maker that sells Firdpase, an FDA-approved drug for treating Lambert-Eaton myasthenic syndrome (LEMS). Firdapse is competing with another recently approved LEMS medication, but this drug has yet to take a meaningful share of the market. In fact, there are several good reasons to think that this rival LEMS drug never will morph into a serious competitive threat. Nonetheless, the market has treated Catalyst's shares as if Firdapse's sales are set to collapse. Underscoring this point, Catalyst's stock is trading at an absurd 1.87 times 2021 projected sales. While this small-cap biopharma does have an elevated risk profile, the market is arguably taking it way too far with this rock-bottom valuation. Catalyst, in fact, should eventually shake off this key overhang to go on to become a top growth stock within the next 12 to 18 months.   

Novavax (NASDAQ: NVAX) is a pre-revenue vaccine company. The biotech's shares have gained almost 300% this year because of a successful top-line readout for its experimental flu vaccine, dubbed NanoFlu, combined with its entrance into the race to develop a vaccine for COVID-19. Novavax is gearing up to submit NanoFlu's regulatory application to the FDA for review, meaning it might be available for next year's flu season. Estimates vary wildly, but the current consensus has NanoFlu generating around $740 million in peak sales. That's quite a potential haul for a company with a market cap of $801 million. So if NanoFlu does indeed gain the FDA's blessing, Novavax's stock should bolt higher. The main risk factor associated with this biotech stock is that the FDA may request additional clinical data before approval, which certainly isn't out of the realm of possibility.  

Wyndham Destinations (NYSE: WYND) is a vacation ownership and exchange company. The company's shares have lost over 63% of their value this year, thanks to the impact of COVID-19 on the leisure travel industry. Wyndham, for its part, recently pulled its financial guidance and suspended share buybacks because of the uncertain outlook for the industry as a result of this deadly respiratory ailment. The bad news is that Wyndham's stock probably hasn't hit rock bottom quite yet. In fact, it's unlikely that demand for leisurely travel lodging will rebound in 2020. But if you're willing to hold this stock for a full five years, it should pay off handsomely after these enormous declines. Wyndham's underlying business model is still a big hit, after all. We just need to get back to the point where tourism -- especially international tourism -- is a thing again. 

3 home-run stocks

Home-run stocks are equities that are seemingly grossly mispriced relative to their long-term value proposition. These types of high-risk, high-reward stocks should never make up an outsize portion of a portfolio, but they are sometimes worth owning in small doses. The following home-run stocks offer investors an attractive risk-to-reward profile, especially after their rough start to 2020. 

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Image source: Getty Images.

Canopy Growth (NYSE: CGC) is a medical and recreational cannabis company that operates out of Smiths Falls, Ontario. Canopy is worth checking out because it's reasonably well capitalized and a leader in terms of cannabis production, product diversity, and annual sales, and it underwent a recent managerial turnover that should lead to a more cost-conscious approach to value creation. Now, this legal marijuana company definitely won't be a big winner for shareholders anytime soon because of the various headwinds facing the industry as a whole. But Canopy's stock might produce stellar gains for investors willing to hold for at least 10 years. Eventually the legal cannabis market will come into its own as a highly lucrative commercial space, a fact that bodes well for leaders in the industry like Canopy. 

Delta Air Lines (NYSE: DAL) is among the world's best known airlines. Unfortunately, the company's shares have gotten blasted this year by the dramatic drop in air travel stemming from the COVID-19 crisis. In fact, Delta's shares are down by an eye-popping 64% from their 52-week highs right now. The bad news is that Delta's stock is surely in for more pain in the weeks ahead. That's an unavoidable outcome, with demand for commercial air travel hitting all-time lows. Like some of the other names on this list, however, Delta's shares should sharply rebound post-pandemic. 

Virgin Galactic (NYSE: SPCE) is a leader in the race to make space tourism a viable industry. Virgin Galactic's shares have slid by almost 15% this year in response to the possibility of a recession and, hence, lower demand for space tourism. But this sell-off might be a perfect opportunity to buy shares. By the end of the decade, Virgin Galactic could prove to be a cutting-edge innovator that makes space tourism a possibility for wide swath of society -- not just millionaires and billionaires with cash to burn. Virgin Galactic may never fully realize this lofty goal, but this novel company definitely qualifies as a possible home-run play.  

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, Apple, Bristol Myers Squibb, Delta Air Lines, MercadoLibre, and Walt Disney. The Motley Fool owns shares of Virgin Galactic Holdings Inc. The Motley Fool recommends BioMarin Pharmaceutical, DexCom, Intercept Pharmaceuticals, Johnson & Johnson, and Verizon Communications and recommends the following options: long January 2021 $60 calls on Walt Disney, short April 2020 $135 calls on Walt Disney, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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