This bear market could be the best investment opportunity in over a decade


Some people see a glass of water half empty. Diehard pessimists probably even think that the water in the glass contains arsenic. I am not part of any of these groups. Count me among those who always see a glass of water half full.

I admit, however, that it is not easy to be optimistic in the current market environment. Most of the stocks in my portfolio are down. However, I’m encouraged when I think about 10 or 15 years from now. Why? This bear market could be the best investment opportunity in over a decade.

Party like it’s 2009?

The late musical prodigy Prince had a big hit years ago with a song that included the lyrics “I’m gonna party like it’s 1999”. For investors, the present (or at least the near future) could be a time to party like it’s 2009 instead.

Looking back, there is no doubt that 2009 was a fantastic time to buy stocks. The S&P500 the index has climbed more than 320% since the beginning of 2009 until today. The Nasdaq-100 the index has skyrocketed nearly 830% over the same period.

But here’s the important thing to know: It didn’t seem like such a big opportunity to many investors at the time. The Great Recession was still going on at the start of 2009. Stocks only bottomed out towards the end of the first quarter of the year. No one knew how long the bear market would last.

Fast forward to today. The economy is not officially in a recession, but many experts expect it to come soon. Many stocks continue to decline overall, even with a bounce here and there. When the bear market will end is anyone’s guess.

The current situation is different from 2008 and 2009, of course. It is also different from the rapid recession caused by COVID-19 and the bear market of 2020. However, I expect that in a few years, investors will look to our current period as a prime time to buy stocks. shares.

Three simple rules

How can investors take advantage of the major opportunity presented by this bear market? I think there are three simple rules to follow.

First, don’t try to time the market bottom. Instead, identify stocks of excellent companies with strong underlying businesses trading at attractive valuations.

Second, buy the best stocks you find gradually. It is entirely possible that the stock market will continue to decline. If so, investing in stages (buying monthly is a good approach) instead of putting all your money into stocks at once could be very helpful to you.

Third, wait. This rule cannot be emphasized enough. Investors who bought stocks in early 2009 and sold them in about a year (whether they were up or down) missed most of the longest bull market in history. It is important to give stocks enough time to run.

Lots of good inventory

The good news for investors is that there are many attractive stocks that meet the criteria mentioned above. I will specifically mention two that I really like.

Some people might be concerned about Google parent Alphabetit is (GOOG 4.30%) (GOOGL 4.41%) shortfall and weak advertising sales growth in the third trimester. Not me.

The company’s long-term prospects remain strong. Alphabet continues to be very profitable. It ended the third quarter with a stock of cash of $139.6 billion. The stock trades at less than 20 times free cash flow, an attractive valuation for a company with such a strong moat and multiple paths to growth.

Vertex Pharmaceuticals (VRTX 9.03%) is another one of my favorite stocks. Unlike Alphabet, it has beaten the market so far this year. I think the future of Vertex looks even brighter.

The drugmaker enjoys a monopoly in treating the underlying cause of cystic fibrosis (CF). It should soon expand beyond the CF. Summit and CRISPR therapeutics plan to file for regulatory approval of exa-cel for the treatment of two rare blood disorders (beta-thalassemia and sickle cell disease) in the coming months. The Company’s pipeline includes two other non-CF therapies with blockbuster potential.

The 20 multiple of Vertex forward earnings may not look very appealing. However, the company’s growth prospects are so promising that I consider the biotech stock a bargain right now.

Again, Alphabet and Vertex are just two examples. You should be able to easily find other good stocks to buy in the current bear market. The glass of water is really half full.

Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Keith Speights has positions in Alphabet (A shares) and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares) and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.


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