Bear markets happen on average once every 3.6 years, according to data from Hartford Funds, the mutual fund company. That makes these events relatively common — and while that can be scary for investors, there is a silver lining. In 100% of the cases, a bull market followed a bear market. That means these otherwise difficult market downturns present excellent opportunities to buy shares of great companies on the dip.
No one knows when the next bear market will happen, but it pays to be ready to pick up stocks from the discount bin when it does. Read on to find out why purchasing shares of Eli Lilly (NYSE:LLY) and Moderna (NASDAQ:MRNA) could be an excellent way to spend a spare $10,000 during the next bear market.
1. Eli Lilly
Eli Lilly is one of the few pharma giants that have handily outperformed the market in the trailing-12-month period. The drugmaker’s shares are up about 50% in the past year compared to gains of 31% for the S&P 500. By comparison, the SPDR S&P Pharmaceuticals ETF — an industry benchmark — has climbed a meager 3% during the same period.
With the economy slowly recovering from the pandemic, Eli Lilly’s business is booming. During the second quarter ended June 30, the company’s revenue jumped 23% year over year to $6.7 billion. Excluding the effects of coronavirus-related dynamics, Eli Lilly’s sales rose 12%, which is still impressive for a pharmaceutical company of this size.
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Several drugs with fast-growing sales continue to push Eli Lilly’s revenue upward. During the second quarter, diabetes medicine Trulicity saw sales jump 25% year over year to $1.5 billion while immunosuppressant Taltz achieved $569 million, 44% higher than the year-ago period.
Other notable products in Eli Lilly’s lineup include cancer drugs Verzenio and Alimta and diabetes medicines Humalog and Jardiance. The company also boasts promising pipeline candidates, among them: Basal insulin-Fc, a proposed once-a-week insulin product that could be a game changer; and donanemab, a potential drug for Alzheimer’s disease.
It’s little wonder the company’s shares have gotten a lot more expensive — at least, going by traditional valuation metrics. Eli Lilly’s forward price-to-earnings ratio of 29 is much higher than the industry average of 14.
Yet, a bear market could make Eli Lilly’s shares more attractive. In addition to the company’s solid lineup and promising pipeline, expect it to continuously add new products to its portfolio and replace those that lose patent protection, thereby keeping its top and bottom lines growing.
If the company’s stock drops following a market downturn, it would be wise to consider picking up shares on the dip.
2. Moderna
Moderna has had an even more fantastic run than Eli Lilly recently, but the company also seems to be trading at a steep valuation. Moderna’s forward P/E of 14 is higher than the biotech industry’s 11. It’s also…
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