Even More ‘Sleep Well at Night’ Stocks

A couple weeks ago, I wrote to you about the types of stocks you’ll want to own when the next bear market arrives.

Generally, a bear market is defined as a downturn of 20% or more in any broad equity index that lasts at least 60 days.

The problem is, no one can accurately predict when the next bear will come.

There is even an argument about when the last bear market was!

Most experts agree that the last bear market took place during the global financial crisis of 2007-’09. The S&P 500 Index dropped -37% in 2008. And it was down -57% from peak (October 2007) to trough (March 2009). Many other markets around the globe fared worse.

Related story: It’s 10 Years Gone for the Financial Crisis … Remember That?

Yet, while I attended the Yahoo! Finance All Markets Summit last month, one expert made a solid counter-argument.

As Michael Batnick, research director at Ritholtz Wealth Management, pointed out to the audience:

We had two bear markets between 2011 and today that for some reason don’t really make the news.

In 2011, we saw a -21% (drop) intraday. So, maybe that’s not official, but on a closing basis it was -19.5%. I don’t know why that’s not a reset of the bull market.

And then, from 2015 to early 2016, as far as I’m concerned, we had one. Dow Transports were down -25% … small caps were down -25% … emerging markets were down -35% … and the median S&P 500 stock was down over -20%.

A couple weeks ago, I gave you seven common-sense tips to help you get ready for the next unexpected bear market.

1. Tune out short-term forecasts.

2. Avoid toxic investor behavior.

3. Use systematic investing.

4. Keep a well-diversified portfolio.

5. Stick to your investment plan.

6. Do your own portfolio stress test.

7. Use protective tools for added safety.

[You can read more about each tip here.]

One question I’ve gotten in the past is: What kinds of stocks are best to own in a bear market?

So, if we revisit the last major bear market, the odds were certainly stacked against investors …

In 2008, 95% of S&P 500 stocks had negative returns. That means only 25 stocks (5%) actually made their shareholders money in 2008.

Many so-called “steady-Eddie” stocks got walloped in 2008. Check out these 15 that went down more than the S&P 500’s -37% that year:

  Goodyear (GT) … -79%

  Ford Motor (F) … -66%

  Deere (DE) … -58%

  Dow Chemical (DOW) … -58%

  Apple (AAPL) … -57%

  Schlumberger (SLB) … -56%

  Alphabet (GOOGL) … -56%

  UnitedHealth Group (UNH) … -54%

  Aetna (AET) … -51%

  Boeing (BA) … -49%

  Merck (MRK) … -45%

  Honeywell International (HON) … -45%

  Microsoft (MSFT) … -44%

  Intel (INTC) … -43%

  Cisco Systems (CSCO) … -40%

You’ll notice the above list doesn’t include any financial stocks. The Financial Select Sector SPDR ETF (XLF) declined -55% in 2008.

So, two weeks ago, I provided the results of 19,000-plus stock study I did over the last 13 years. (A Morningstar colleague helped me with the data.)

Basically, I was hunting for a list of “sleep well at night“ stocks. Steady winners that powered through any correction or bear market.

This insight, not attainable from run-of-the-mill financial websites, would provide an idea of what stocks to own when the next bear market arrives.

With the help of my colleague, I narrowed a list of 19,102 stocks down to 70 stocks (0.4%) that didn’t have a loss of 10% or more in any calendar year over the last 13 years.

There were only four stocks, or 0.02%, that had positive returns in each of the last 13 calendar years. Those four stocks are AutoZone (AZO), Chesapeake Utilities (CPK), General Mills (GIS) and Waste Connections (WCN).

But, after receiving some questions as to what else showed up on the list, I decided to share some more stocks with you.

The following table includes 25 stocks that had only one or two single-digit percentage loss years in the last 13 years.

While past performance is not indicative of future results in Accenture (ACN), American States Water (AWR), Automatic Data Processing (ADP), Balchem (BCPC), Ball (BLL), Chubb (CB), Church & Dwight (CHD), Delta Natural Gas (DGAS), Exponent (EXPO), Fresenius Medical Care (FMS), McDonald’s (MCD), NetEase (NTES), Northwest Natural Gas (NWN), Norwood Financial (NWFL), O’Reilly Automotive (ORLY), ProAssurance (PRA), Rollins (ROL), Sherwin-Williams (SHW), Silgan Holdings (SLGN), Snyder’s-Lance (LNCE), Somerset Trust (SOME), Tanger Factory Outlets (SKT), Vectren (VVC), Waste Management (WM) and WGL Holdings (WGL) …

If the last 13 years is any guide, these additional 25 stocks stand a good chance to hold up well in the next correction or bear market, as well.

Grant Wasylik

Originally from Pennsylvania, Grant graduated from Juniata College with an economics major and accounting minor. Since graduation, Grant has worked in the investment industry for almost two decades by serving in various roles … Prior to coming to…