This year has been difficult for investors, with the S&P500 the index down 20% until June, which officially puts us in a bear market. Watching your investment portfolio lose money is deeply disturbing. However, as uncomfortable as bear markets are, they are an integral part of healthy markets. At some point, the market sale will end.
It’s hard to predict the end of a bear market, so it’s important to maintain a long-term investment mindset and focus on buying high-quality companies with competitive advantages. durable. That said, here are three great companies you can buy today that can continue to outperform long after the bear market ends.
1. FactSet Research Systems
FactSet Research Systems (SDS 0.56%) provides investors with financial data and analysis to research investments, build portfolios and manage risk. The company brings in money through a subscription-based business model with products like portfolio analytics and market data.
2021 has been a banner year for the company, which shows no signs of slowing down despite volatile market conditions. In its latest earnings report (for the quarter ended May 31), the company said revenue was $489 million, a 22% increase over last year. Operating expenses grew faster than revenue, causing net profit to decline 26% year-over-year. However, half of the increase in expenses was due to freeing up rented office space during the transition to a hybrid work environment.
What makes FactSet impressive is its steady growth; the company has increased its revenue for 41 consecutive years. Over the past decade, revenue has grown at a compound annual growth rate (CAGR) of 8% and earnings per share (EPS) has grown at a CAGR of 10.6%.
The company is on solid ground thanks to its large datasets, which it has extended to private markets, alternative markets and environmental, social and governance (ESG) data. Last year, it acquired Cobalt Software for $50 million, a company that provides portfolio oversight for private industry.
FactSet does a great job of providing data solutions to investors through a subscription-based model, which gives it a stable revenue stream and solid profit margins — and is a great stock to buy in this bear market.
MSCI (MSCI -0.48%) provides investors with tools to help them build portfolios, manage risk, develop ESG solutions and manage index products. It has 6,300 clients in 95 countries, including pension funds, central banks, asset managers and other finance professionals.
The company is perhaps best known for its index products, which account for 61% of its total revenue. Its largest client is BlackRock, which accounts for 12.7% of revenue, and nearly all of that revenue comes from BlackRock’s ETFs based on its indices.
MSCI recently posted its best first quarter ever, with operating revenue up 17% year-over-year while EPS rose 18%. Impressively, its index product had its 33rd straight quarter of double-digit year-over-year subscription growth.
MSCI has been a big winner in the push towards passive investing, and it currently updates 267,000 indices daily. Over the past decade, MSCI’s revenues have grown at a CAGR of 8.6% and its free cash flow has grown at a CAGR of 10.8% with strong profit margins. MSCI is a key player in the development of index products, and its earnings show it, making it another stellar stock to buy in this bear market and hold for the long haul.
3. S&P Global
When companies seek to issue debt securities, rating agencies like S&P Global (SPGI -0.25%) analyze the risks of the business and assign a score which ultimately determines how much interest the business will pay to lenders.
S&P Global is an integral part of the debt markets and regulations create high barriers to entry, giving S&P Global a significant advantage. This is why S&P Global and Moody’s hold about 40% market share each. Thanks to high barriers to entry and an asset-light business model, S&P Global’s gross profit margins have averaged nearly 70% over the past decade.
The company derives about 50% of its revenue from its credit rating business, which has slowed significantly this year as US debt issuance fell 35%. However, S&P Global’s other businesses, such as research, analytics and index products, were up 51% in the first quarter from a year ago.
S&P Global is another stellar company that has rewarded investors with 49 years of consecutive dividend increases, making it one year of exclusive Dividend King status. Given its intrinsic advantages and strong cash flow generation, S&P Global is another company you’ll want to buy on sale before this bear market ends.