Stocks to buy

Plan Ahead! 7 Stocks to Buy Before Any Market Downturn Occurs

With rising jitters tied to broader monetary policy and its impact on the equities sector, stocks to buy for a market downturn has spiked in interest. Nevertheless, it pays to plan ahead with ideas that might ride out the red ink.

Please don’t misunderstand what I’m saying. When a shock downcycle occurs, it tends to take down most asset classes. However, as telehealth operators found out when Covid-19 initially upturned the global economy, some relevant ideas just might move higher from the pain.

Granted, that was a unique event and the same situation might not apply in the next downcycle, whenever that is. Still, it’s more than possible that a select few enterprises may outperform the rest of the competition. With that, below are compelling candidates for stocks to buy for a market downturn.

Dollar General (DG)

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As a frontrunner for stocks to buy for a market downturn, it might not get more relevant than Dollar General (NYSE:DG). For full disclosure, I have not been a fan of the discount dollar store. One of the biggest concerns is gross margin pressure. Going the discount route is already incredibly challenging. But going that route during an inflationary cycle? Yikes.

However, if the market decides to suffer from indigestion, Dollar General would likely rise due to simply cynicism. Under a strained economy, companies will need to cut costs. That means layoffs, which would impede family budgets. Given the pressure, people will be forced to trade down to the bare bones. That’s where Dollar General comes into save the day.

Also, DG stock is heavily de-risked on a relative basis. Over the past 52 weeks, shares lost about 33% of their market value. So, the bears may have already had their fun with Dollar General.

Casella Waste Systems (CWST)

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As a candidate for stocks to buy for a market downturn, Casella Waste Systems (NASDAQ:CWST) sells itself. As you might guess from its corporate name, Casella specializes in waste management. Per its public profile, it’s a vertically integrated solid waste services company. While the market may focus on innovations like artificial intelligence, the real story stems from Casella’s industry.

In other words, the more advanced we become as a society, the more resources that we consume. And that invariably means we produce more waste. Given the laws of the physical world, whatever waste products we generate must go somewhere. And since other countries have had enough of being a waste depot, enterprises like Casella will only rise in relevance.

That’s why I’m not really sure if CWST will incur too much of an impact during a volatile cycle: the industry is simply too important. Analysts recognize this dynamic, pegging shares a moderate buy with a $99 price target.

Sempra (SRE)

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One of the biggest stories in San Diego, California comes from Sempra (NYSE:SRE), the parent company of utility firm SDGE. According to a local CBS report, Sempra made close to $3 billion in profits last year. That has investors naturally celebrating. However, a group called Power San Diego has been none too happy, demonstrating earlier this week outside Sempra’s headquarters in downtown San Diego.

The issue? As you might imagine, the group – which calls for a non-profit utility to replace SDGE – is upset. While many San Diegans struggle to pay their utility bills, Sempra is cleaning house. According to one of Power’s representatives, people in Los Angeles are apparently paying less than the folks in America’s Finest City.

I know firsthand – it’s an ugly situation. At the same time, SRE could very well be one of the stocks to buy for a market downturn.

Like it or not, people will put up with this dynamic because you’re not going to find San Diego-like weather in say Cleveland. It’s the sunshine tax and Sempra will get its cut.

Pfizer (PFE)

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When it comes to stocks to buy for a market downturn, entities like Pfizer (NYSE:PFE) make much sense on paper. In a world of rising biological threats, pharmaceutical companies only become more relevant. Further, with chronic diseases imposing a major societal burden, people are desperately hoping for medical solutions. Here, PFE stock seems particularly compelling.

It’s not just about the science. We all know about Pfizer’s success with its Covid-19 vaccine. Moving forward, it can leverage the acumen gleaned in producing a messenger-RNA-based solution for therapeutics for other diseases and conditions. However, because PFE rose so much thanks to Covid, when the pandemic faded, so too did its share price.

Actually, PFE plunged. However, this circumstance could be a positive in that again, the bears may have moved on. If so, another downturn might not destroy its market value like it might for its lofty peers.

Presently, analysts peg shares a consensus moderate buy with a $31.88 average price target.

NextEra Energy (NEE)

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Since the doldrums of 2020 to late 2021, investors seemingly couldn’t get enough of NextEra Energy (NYSE:NEE). As a utility giant pivoting aggressively to renewable energy solutions over the past several years, NextEra aligned itself with contemporary considerations. These days, seemingly everybody’s talking about green and renewable energy infrastructures. However, the inflation and subsequent rise in interest rates in 2022 onward did a number on NEE stock.

Further, the pain has continued into this year. Sure, there have been some signs of optimism, particularly with the Federal Reserve indicating that it may lower interest rates later this year. However, inflation has proven to be stickier than previously anticipated. Therefore, NEE has largely struggled. Still, the current frustration could make NEE one of the stocks to buy for a market downturn.

Again, the bears might see other companies as more compelling victims. With NEE already losing so much value, the risk-reward proposition might not favor short traders. Also, NextEra remains relevant, irrespective of market or economic fluctuations. Not surprisingly, analysts remain bullish with a moderate buy view and a $68.89 average price target.

Newmont (NEM)

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As the world’s largest gold-mining corporation, Newmont (NYSE:NEM) commands substantial relevancies. If we’re talking about stocks to buy for a market downturn, it can’t be avoided that the underlying asset tends to perform well during periods of uncertainty. That’s called the fear trade. Further, with gold commanding intrinsic value, Newmont in an indirect fashion could act as an inflation hedge.

However, speculators may be able to buy NEM stock confidently ahead of a possible downturn. How so? Basically, Newmont has already lost so much. Since the beginning of the year, shares slipped almost 24%. Over the past one-year period, the security tumbled more than 29%. To be fair, the gold space has been choppy. Still, NEM has been unusually volatile.

Looking ahead, though, analysts foresee a recovery. In the current year, they project sales of $21.95 billion, up 37.3% from last year. In 2025, they believe revenue of $23.3 billion is possible. Overall, Wall Street’s experts peg shares as a consensus moderate buy with a $44.13 price target. That’s over 41% higher than current levels.

EZCorp (EZPW)

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An almost unique idea in the market, EZCorp (NASDAQ:EZPW) represents one of the few publicly traded pawn shops. Believe it or not, pawn shops do more than act as a backdrop for reality TV programs. According to the Federal Deposit Insurance Corporation (FDIC), an estimated 4.5% of the U.S. households (or about 5.9 million people) were unbanked in 2021. That means no one in the household had a checking or savings account.

Well, many folks who are unbanked turn to pawn shops for what is essentially credit. In a typical banking relationship, a customer may borrow money from the financial institution. Bad things – like getting your credit wrecked – occur when people fail to make good on their loans. In the case of pawn shops, patrons put up their physical possessions as collateral for loans.

It’s quite possible that if the economy takes a bad turn, pawn shop operators like EZCorp could thrive. Therefore, it ranks as one of the possible stocks to buy for a market downturn. Canaccord Genuity’s Brian McNamara agrees, forecasting a price per share of $17 or 62% up.

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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