The Dow Jones Industrial Average officially fell into bear market territory at the end of September, falling just over 20% compared to where it started the year, but has steadily regained ground since. In fact, it's not even in "correction" territory anymore, as it is down less than 10% year to date.
Still, the potential for another leg down seems great. Many analysts and economists believe the U.S. will enter a recession early next year, which could cause the stock market to fall. The housing market is in free fall as interest rates rise, the auto market is souring quickly with the number of repossessions higher than pre-pandemic levels, and inflation is still at 40-year highs.
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Yet investors are better off having a long-term mindset than trying to predict market tops or bottoms. Bear markets tend to be measured in months, while bull markets last for years, so it's not so much when you buy stocks but rather that you buy quality companies and hold onto them. Think in terms of decades rather than weeks, months, or even just a couple of years.
That's why the smartest investors will be looking at the following pair of stocks, which can make investors very wealthy in the years to come.
1. PPG Industries
Only a relative handful of companies have been in constant operation for over 100 years, but paint and coatings maker PPG Industries (PPG -0.70%) is a member of that illustrious group. What sets companies like this apart is that they've been through numerous business and market cycles like this before, from world wars and depressions to global pandemics and recessions.
PPG is somewhat insulated from the slowing housing market, as residential housing accounts for less than 10% of revenue. But it has partnered with Home Depot (NYSE: HD) to expand its commercial customer base, particularly in the commercial maintenance area, and it sees potential large growth in the architectural coatings market as a result.
Raw materials prices are starting to come down and could significantly retrace their previous lows which, coupled with its own cost-cutting measures, could provide meaningful savings for PPG's bottom line. It may not be recession-proof but it is certainly resistant to the worst gyrations of the market.
The coatings specialist pays a dividend to investors and has done so every quarter since 1899. It has also increased the payout for over 50 years, making it a Dividend King and one of the most dependable dividend stocks on the market.
The stock is down 28% year to date because a few of its end markets have faced slowdowns this year, namely Europe and China, but with the latter finally easing back its zero-tolerance COVID-19 restrictions, stronger growth is on the horizon.
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2. Caterpillar
Heavy equipment manufacturer Caterpillar (CAT -0.62%) is another dividend favorite, having made a payment every year since its founding in 1925 and raised it for 29 straight years.
It has already been enjoying strong growth as countries invest in infrastructure projects analysts see a multiyear cycle for such work just beginning. Caterpillar's third-quarter sales rose 21% to $15 billion, while profits and margins both widened as it continues to be able to raise prices to offset the impact of inflation, its own rising costs, and the effects of foreign currency fluctuations.
Caterpillar's stock is up 20% over the past year but trades at 17 times next year's earnings and twice its sales. With long-term global upside to its business in construction, mining, and infrastructure, there is plenty of upside for investors buying now and holding onto shares for the long haul. Coupled with the dividend payment that yields 2% annually, investors will reap both income and capital appreciation.
