Investors have plenty to be excited about as we kick off another year. With three consecutive double-digit return years in the market, many younger investors don’t really know much else other than “market go up.”
Of course, for older investors who have lived through the GFC, dot-com bubble, or previous downturns in the 1990s or 1980s, it’s not a straight line higher. And in fact, the longer of a stretch we go with valuation multiples expanding and the economy booming, the probabilities of at least a correction or bear market increase substantially.
I’m going to be clear – a market crash in 2026 isn’t my base case. However, my calculus has shifted in terms of the probabilities I assign to each of my scenarios.
For those who may be more concerned about big downside in the market this year relative to most of the market experts and talking heads, here are three top stocks I think are worth buying right now.
McDonald’s (MCD)
This first pick is really quite an easy one. Americans love to eat out at restaurants. During boom times, it’s normal to see bars, nightclubs, fine dining establishments, and a range of other pricey options take more share. However, when the economy does sour, those looking for a meal they don’t have to cook will trade down.
We saw this trend play out during the GFC, with McDonald’s (NYSE:MCD | MCD Price Prediction) seeing its revenue and earnings actually grow throughout the downturn. In other words, McDonald’s really wasn’t affected at all by the incredible job loss and loss of wealth which permeated the overall economy. If anything, the company may have done better as a result (with foodies shifting down toward value items).
Those with a very bleak view of where equities are likely headed in the near to medium-term should consider this fact. And with McDonald’s still posting healthy system-wide sales growth of around 8% this past year and earnings growing at a muted pace of around 2% (still solid for a company of its size), I think MCD stock could be one of the most recession resistant options in the market today, making this level of growth more acceptable for long-term investors.
Dominion Energy (D)
Another top classic defensive option for investors is Dominion Energy (NYSE:D), a top regulated utilities giant posting strong earnings growth and solid forward momentum on this front. After spending years repositioning its business toward higher-growth strategic goals, these moves appear to be paying off. This past quarter, Dominion posted rock-solid revenue growth of 15% on a year-over-year basis, with net income rising approximately 8% over the same period. Notably, these returns came despite unfavorable weather conditions which did not work in the company’s favor.
Trading at less than 20-times trailing earnings at the time of writing, I’d certainly put Dominion in the value bucket right now. And with the regulated rate base expected to grow quickly in the years to come thanks to grid modernization efforts, the rise of renewables and electrification overall, and other key factors affecting Dominion’s core business, this is a stock with very stable cash flows I think investors want to consider in an uncertain environment.
With a low beta around 0.7 and a rather impressive dividend yield of around 4.5%, this is a stock I think investors looking for a way to wait out an incoming storm ought to consider.
Amaren (AEE)
The last pick on my list happens to be another regulated utility stock, this time with an infrastructure angle I think could provide excellent growth. Amaren (NYSE:AEE) is the company I’m talking about.
There’s a bit more cyclicality with owning a utility stock like Amaren, with much of the company’s growth tied to surging Capex spending across transmission, distribution and generation assets. If we do see this spending slow, it’s possible that there could be more cyclical downside for a stock like AEE. That said, I think Amaren provides a nice balance to other holdings like Dominion, providing increased exposure to many of the investment trends driven by the AI theme right now.
The reality is that regulated electric and gas utilities will continue to see strong demand and predictable earnings growth for years to come. I think that’s a relatively safe bet most investors can get behind. Indeed, Amaren’s recent results speak to such a thesis, with its Q3 revenue surging 16% over the same quarter the year prior and EPS surging 16% (indicating margin expansion) over that same period.
I think investors looking for a reasonably valued defensive stock (at less than 20-times earnings) with a 2.8% dividend yield have another great option in Amaren right now.
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