Don’t Panic! 7 Smart Stocks to Buy if the Markets Take a Tumble.

While the equities sector roars higher, it’s never a bad idea to consider stocks to buy for a down market. No, I’m not prognosticating an imminent calamity. Rather, I just think it’s smart to think ahead.

Essentially, stocks to buy for a down market is Wall Street’s equivalent of an emergency kit. You do have one of those, don’t you? Because if you don’t, you should get one. Sure, it might seem like a waste of time and money, especially if an emergency doesn’t materialize. But that’s the thing – unexpected calamities have a way of being, you know, unexpected.

Similarly, I don’t think you’re going to get uber-rich with these stocks to buy for a down market. However, should the red ink start flying, you’re going to sleep easier buying these giants on the dip.

Johnson & Johnson (JNJ)

Source: Alexander Tolstykh / Shutterstock.com

A pharmaceutical giant, Johnson & Johnson (NYSE:JNJ) is now a more streamlined operation, having spun off its consumer health products division. While I have some reservations about the move, in the long run, it may unlock value for stakeholders prior to the spinoff. Looking ahead, though, J&J itself should benefit from rising permanent demand.

According to Acumen Research and Consulting, the global pharmaceutical market reached a valuation of $1.5 trillion in 2022. Analysts anticipate that the sector will expand at a compound annual growth rate (CAGR) of 6.4% from 2023 to 2032. At the forecast’s culmination point, the industry should be worth $2.8 trillion.

Another factor benefiting JNJ as one of the stocks to buy for a down market is the value proposition. Even without a downcycle, shares trade at a modest trailing-year earnings multiple of 13.29X. If the red ink starts flying, JNJ should be more attractive.

Analysts view the company as a consensus moderate buy with a $177.67 price target, implying 10% upside potential.

Coca-Cola (KO)

KO stock PEP stock: a can of Coca-cola and a can of Pepsi on either side of a glass of brown soda and sitting on top of a pile of ice

Source: monticello / Shutterstock

A soft-drink giant, Coca-Cola (NYSE:KO) makes for an ideal play for stocks to buy for a down market because of everyday relevance. Recently, a few major enterprises have demanded an ultimatum regarding work from home: either come back to the office or kiss your job goodbye. With this sharp pivot from the pandemic days, demand for caffeinated products should rise.

At the same time, consumers have struggled with years of high inflation and spiked borrowing costs. People are still opening their wallets but many sectors have indicated concerns about waning capabilities. So, demand for expensive coffeeshops might fade. Cynically, the trade-down effect should benefit KO stock. The underlying product is cheap (and necessary), thus offering a superior alternative.

To be sure, KO isn’t exactly a sterling deal on paper. Nevertheless, it offers a forward dividend yield of 3.21%, combined with a payout increase going on 63 years. If you’re looking for stocks to buy for a down market, it doesn’t get much more trustworthy than Coca-Cola.

Target (TGT)

tgt stock

Source: Sundry Photography / Shutterstock.com

Ordinarily, I might go with another big-box retailer other than Target (NYSE:TGT) for stocks to buy for a down market. Yeah, I’m talking about Walmart (NYSE:WMT). If the smelly stuff hits the proverbial fan, Walmart seems more capable of withstanding a wider economic hit. Based on the latest consumer demographic data, Walmart shoppers tend to align with realistic income brackets.

On the other hand, Target tends to align with consumers within higher income levels. Nevertheless, they both provide one-stop shopping experiences that allow them to stay relevant in the age of e-commerce. Further, what I appreciate about TGT stock specifically is that it’s more “technically” undervalued than WMT. The former security is up about 6% on a year-to-date basis while the latter gained over 12%.

Also, I can’t overlook the better value proposition in terms of passive income. Right now, Target offers a forward dividend yield of 2.91%. On the other hand, WMT is comparatively miserly with a yield of 1.39%. Analysts rate Target a consensus strong buy, which seems reasonable.

Costco (COST)

A Costco Wholesale (COST) warehouse in Auburn Hills, Michigan.

Source: ilzesgimene / Shutterstock.com

A similar investment to Target and Walmart, Costco (NASDAQ:COST) should also be on your radar for stocks to buy for a down market. Fundamentally, I appreciate COST stock for its viable consumer demographics. The main takeaway is that shoppers tend to be younger and more upwardly mobile. In other words, Costco’s demo indicates that it starts at a high point and is only rising.

From an investment standpoint – especially in a segment that overlaps with the broader discretionary retail space – I don’t think you can ask for much better. Now, here’s the thing with COST stock: I wouldn’t buy it at this juncture. Rather, if the market gives you a sizable dip because of some disastrous economic event, Costco is a name to pick up on the cheap.

Some ideas you simply don’t trust when the red stains emerge. That’s because their questionable business models become even more suspect under sever economic duress. But Costco? The retailer has weathered multiple storms. Further, it enjoys natural insulation because of its educated, higher-wage-earning members.

IBM (IBM)

Photo of IBM (IBM) building as seen through the canopy of a tree. IBM logo is in large letters on side of building.

Source: shutterstock.com/LCV

When it comes to stocks to buy for a down market, IBM (NYSE:IBM) is an “OG” stock. That’s slang for “original gangster” or “gangsta” if you’re really cool. Basically, Big Blue is an authentic, old-school technology investment. While everybody’s been going gaga over enterprises like Nvidia (NASDAQ:NVDA) for facilitating artificial intelligence, IBM has been doing AI since most of you were born.

After years of languishing in the shadows, it appears that the legacy tech juggernaut is finally receiving some dues. It’s not enough. However, I’m sure long-embattled stakeholders will take a 15% pop to start 2024. Also, in the past 52 weeks, IBM stock gained almost 45%.

If you peruse IBM-related stories on InvestorPlace, I’ve been pounding my fist on the table for a reason. While other companies may be playing cute games with digital intelligence, IBM has been forwarding real solutions. So, I trust that if heaven forbid a severe downturn impacts the market, I can trust Big Blue on any dips.

Microsoft (MSFT)

Microsoft logo close up. Microsoft (MSFT) Flagship Store Fifth Avenue, Manhattan, NYC.

Source: The Art of Pics / Shutterstock.com

Another major tech giant with a long history, Microsoft (NASDAQ:MSFT) is one of the contemporary beneficiaries of the AI boon. Since the start of January, MSFT stock gained just under 10% of market value. In the past 52 weeks, it shot up almost 66%. With everyone still head over heels regarding digital intelligence, Microsoft may continue to rise.

However, if the market suffers some indigestion, MSFT would easily rank among the stocks to buy for a down market. It’s not just about the AI investments, which has proven fruitful. However, the utility of generative AI is questionable at this moment. What’s not questionable? Microsoft’s dominance in most other areas of productive technologies.

For example, the business world might implode without Microsoft’s suite of office products. Programs like Word and Excel – though they do have their quirks and issues – remain indispensable. Further, the company dominates the PC operating system market environment.

If you want to draw some cute pictures, Apple (NASDAQ:AAPL) might be a better bet. For everything else, there’s Microsoft. It’s a strong buy for a reason.

Amazon (AMZN)

Closeup of the Amazon logo at Amazon campus in Palo Alto, California. The Palo Alto location hosts A9 Search, Amazon Web Services, and Amazon Game Studios teams. AMZN stock

Source: Tada Images / Shutterstock.com

To be 100% clear, if you’re looking for a discounted opportunity, buying tech and e-commerce giant Amazon (NASDAQ:AMZN) right now is a tricky proposition. Just at a glance, you’re talking about a security that’s traded at a near-60X trailing-year earnings multiple. Not only that, the forward earnings multiple isn’t that much better at 41X. Still, if the red ink starts flying, AMZN should be on your watch list.

It’s real simple: the company has reached a knowledge-saturation point where it’s likely impossible to put the genie back in the bottle. With Amazon users enjoying the everyday convenience of product and food delivery, less incentive exists to shop in person. More than that, the company’s controversial role as the vacuum cleaner of small businesses everywhere has succeeded in one critical element: fostering effective economies of scale.

That might help to explain why even in an ecosystem impacted by stubbornly high inflation and interest rates, e-commerce as a percentage of total retail sales continues to rise since the second quarter of 2022.

It doesn’t make sense until you realize the (evil) genius behind Amazon. Clearly, it’s one of the stocks to buy for a down market.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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