3 Stocks Worth Buying During a Stock Market Sell-Off

A quick glance at the annual returns of the S&P 500 over the last 10 years, and you’d think that investing in the stock market has been easy. However, plenty of ups and downs have demanded patience and a fair share of grit to get through.

There have been two major corrections in the last three years alone. Between Sept. 20, 2018 and Dec. 24, 2018, the S&P 500 plummeted 20%, mainly due to U.S.-China trade war fears. Between Feb. 19, 2020 and March 23, 2020, the S&P 500 plummeted 34% as the risks of the COVID-19 pandemic rippled through the market.

We can’t control why the next market sell-off will happen or when it will occur. But we can make a game plan of what to buy when the time is right. Three Fool.com contributors selected Stepan (NYSE:SCL), FedEx (NYSE:FDX), and Illinois Tool Works (NYSE:ITW) as three industrial stocks worth buying if the market takes a turn for the worse. 

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Better recession-readiness through chemistry

Scott Levine (Stepan): When looking to gird your portfolio against the stock market volatility that accompanies a recession, there are the usual suspects to consider — utilities, gold stocks, etc. — but one company that may not immediately pop into mind is Stepan, a leader in chemical manufacturing.

Supplying companies in a variety of industries, Stepan’s diverse global customer base, which includes agriculture, oilfield, construction, and cleaning products, to name a few, ensures that its offerings remain in demand during an economic slowdown. Take the Great Recession, for example. From December 2007 through June 2009, shares of Stepan rose 45%, while the S&P 500 plummeted 38%. 

The financial crisis wasn’t the only economic downturn where Stepan proved its mettle. The company has been in business since 1932, so it’s seen its share of ups and downs in the market, and it’s still going strong. Over the past 53 years, in particular, Stepan has demonstrated its business fortitude in consistently raising its dividend, elevating its status to that of a Dividend King. In case investors unfamiliar with Stepan fear that its steadfast attention to its dividend would jeopardize its financial health, the fact that the company has averaged a 21.2% payout ratio over the past five years signals it can easily afford its quarterly payouts.

Should the economy take a turn for the worse, Stepan is well positioned to withstand the challenges that will emerge. The company, for example, has taken a conservative approach to leverage. As of the end of the second quarter of 2021, Stepan has a net debt-to-EBITDA ratio of 0.6.

People may take a pass on going out to dinner or skip updates to their wardrobes during a recession, but there’s less of a chance that they’ll stop using shampoo or washing the dishes at home — illustrating the importance of Stepan’s chemical products in our daily lives regardless of how the economy is faring.

This leading transportation stock is built…