Nasdaq Bear Market: 3 Extremely Safe Stocks You’ll Regret Not Buying on the Dip

Nasdaq Bear Market: 3 Extremely Safe Stocks You'll Regret Not Buying on the Dip

It’s been quite the year for the investing community. Since hitting all-time closing highs during the first week of January, the benchmark S&P 500 and widely followed Dow Jones Industrial Average have both entered correction territory (i.e., a decline of at least 10%).

Meanwhile, things are even worse for the growth-dependent Nasdaq Composite (NASDAQINDEX: ^IXIC). Following its all-time high in November 2021, the Nasdaq has tumbled 27%. In fact, on May 5, the index endured one of its worst single-session performances in history (a 647-point decline). The Nasdaq’s tumble officially places it in a bear market . Image source: Getty Images. Although the velocity of moves lower in the broader market can, at times, be nerve-racking during a bear market, history shows that putting your money to work during these spikes in volatility is a smart move. That’s because every major downturn in the stock market has eventually been wiped away by a bull market rally.

However, this doesn’t mean you have to be a hero and try to catch a falling knife. Instead, buying safe stocks that are trading at a discount can be highly rewarding during a bear market. What follows are three extremely safe stocks you’ll regret not buying on the dip. Microsoft

The first incredibly safe stock investors can confidently scoop up on the dip is software behemoth Microsoft (NASDAQ: MSFT) .

Considering what’s happened with tech stocks of late, some folks might be leery of putting their money to work in Ole Softy. However, this is one of the few companies to respond well after delivering its quarterly earnings. Further, its five-year monthly beta of 0.91 implies that it’s 9% less volatile than the benchmark S&P 500.

One of the coolest things about Microsoft that few people are aware of, and what makes it such a safe stock, is its credit quality. Only two publicly traded companies sport the highly coveted AAA credit rating from Standard & Poor’s (S&P), and Microsoft is one of the two. This is a company with $104.7 billion in cash ($26.7 billion net cash) that generated $87.1 billion in operating cash flow over just the past 12 months. Even with $78 billion in combined debt and operating lease liabilities, S&P has the utmost confidence Microsoft will make good on its obligations.

From an operating standpoint, Microsoft is relying on its legacy segments for top-tier margins and cash flow, while leaning on cloud solutions to an increasing degree for its growth .

For instance, data from GlobalStats notes that Windows has accounted for 73% to 76% of operating system market share globally over the trailing year (ended April 2022). Even if sales flatline for Windows, the cash flow from this segment can be used to push higher-growth initiatives or to help facilitate acquisitions.

Meanwhile, cloud solutions are growing like wildfire. Azure is the world’s No. 2 cloud infrastructure solution, based on enterprise spend, with sales rising by 49% on a constant currency basis in Microsoft’s fiscal third quarter (ended March 31, 2022). The beauty of cloud infrastructure is that it’s still in the early innings of its growth and it’s producing some very juicy operating margins.

Considering that Wall Street expects Microsoft to grow sales by 15% or more annually, its forward-year price-to-earnings ratio of 25 is quite reasonable. Image source: Getty Images. Johnson & Johnson

A second extremely safe stock investors can buy into during the Nasdaq bear market swoon is healthcare conglomerate Johnson & Johnson (NYSE: JNJ) . Based on a five-year monthly beta of 0.72, J&J is considerably less volatile than the S&P 500.

As noted, only two publicly traded companies have a AAA credit rating from S&P. Microsoft is one and Johnson & Johnson is the other. To put this into context, the U.S. federal government has been given a AA credit rating by S&P. This means the rating agency has more faith in J&J making good on its outstanding debts than it does of the U.S. government doing the same. That should help nervous investors sleep better at night.

Something else to consider is the defensive nature of the healthcare sector . No matter how high inflation goes, or how poorly the U.S. economy performs, people still get sick and require care. This sets a base level of demand for prescription drugs, medical devices, and healthcare services. It effectively means that recessions don’t have much of an effect on J&J’s diverse healthcare operations.

Another reason J&J has been such a superstar for investors is the fact that each of its operating segments brings something important to […]

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