Take Warren Buffett's Advice and Do This During the Bear Market

A great way to learn about investing strategies and what to do in bear markets is to read through the annual reports of Berkshire Hathaway, where you’ll find plenty of insights from billionaire investor Warren Buffett. And when it comes to downturns, Buffett sees opportunity: “The best chance to deploy capital is when things are going down.”

Why Buffett doesn’t mind if a stock he buys goes down

Buying during a market crash can be scary because investors don’t want to see their investments continue to fall and turn red just after buying them. But for Buffett, he sees that as an opportunity to buy more of a stock, rather than worry and sell it off in a panic. Buffett, however, is not a speculative investor, nor does he invest based on a meme.

Buffett’s decisions are based on fundamentals rather than analyst forecasts or projections for the economy, so he isn’t going to panic just because a stock has gone down in value. Many stocks have crashed over the past year, for instance, even though their underlying businesses may still be strong. For investors, that creates an opportunity to average down and buy more shares, or to simply take on a new position.

Two good opportunities out there today to deploy capital

There are many good stocks trading at reduced multiples that investors may want to buy today. A couple of solid Buffett-type stocks backed by strong fundamentals that are particularly attractive and trading near their 52-week lows are CVS Health (CVS -0.99%) and Walt Disney (DIS 0.81%).

1. CVS Health

CVS is a healthcare giant whose shares fell 10% last year (although it did outperform the S&P 500, which declined by 19%). The stock struggled in 2022 despite being relatively stable and potentially becoming more diversified through its planned acquisition of home health company Signify Health and setting its sights on primary care.

With an insurance business, a retail pharmacy business, and a pharmacy benefits management business, CVS offers a great way to gain exposure to the overall healthcare industry. It also pays a dividend yield of 2.6% and has generated nearly $20 billion in free cash flow over the past year. The stock trades near its 52-week low and at a forward price-to-earnings multiple of just 10 — well below the S&P 500‘s multiple of 17.

All in all, it’s a good deal for long-term investors.

2. Walt Disney

A stock that has sustained an even larger decline than CVS is Walt Disney, down a crushing 44% last year.

A change in CEOs and some poor earnings results are just a few examples of how the past year was a tumultuous one for the business. Disney faces a tough road ahead amid inflation as its parks may be too pricey for consumers on a budget. Meanwhile, it may need to spend aggressively for its Disney+ streaming service to compete with rival Netflix.

The strength and popularity of Disney’s brand, however, is what makes it an attractive buy. The ability for Disney+ to catch up to Netflix in subscribers is a testament to the strength of its content and brands. And even during a challenging quarter where inflation posed a big problem for the economy, Disney’s revenue of $20.2 billion (for the period ended Oct. 1, 2022) rose 9% year over year, and free cash flow still totaled $1.4 billion, declining by just 10%.

The stock is also trading near its 52-week low, making Disney another example of a beaten-down stock that investors may want to buy right now.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Netflix, and Walt Disney. The Motley Fool recommends CVS Health and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long January 2024 $145 calls on Walt Disney, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.