3 great ASX shares I want to buy in the next bear market

These stocks would be too good to miss, in my opinion.

| More on:
An ASX investor relaxes on her couch as the Harvey Norman share price drops due to the shares trading ex-dividend from today.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX share market is currently trading at close to its recent all-time high. It could keep climbing in the long term if supportive factors become stronger, such as rising business profits and/or reductions in the interest rate. However, you never know when the next bear market is going to happen.

I'm not forecasting when there's going to be a crash or by how much the fall could be. However, history has shown that crashes do regularly happen – the share market is not rational 100% of the time – sometimes it becomes too exuberant, and occasionally a black swan event happens.

If there is another crash, there are at least three ASX shares that I'd look to buy.

Australian Ethical Investment Ltd (ASX: AEF)

Australian Ethical is a fund manager that aims to provide investors with funds that have a high level of ethics. For example, it avoids investing in sectors like oil and tobacco.

If we look at the Australian Ethical share price over the last five years, we can see there has been enormous volatility.

But, in funds under management (FUM) terms, it has been more stable and the growth has been pleasing.

A fall in the share market naturally hurts the FUM. I think that can prove to be a good time to buy the ASX share, with the future recovery in mind. But, with the company benefiting from sizeable superannuation payments every quarter, it continues to experience good FUM inflows.

I think long-term FUM growth can help the company's operating leverage, boosting its profit margins and ultimately helping the bottom line.

Any short-term pullback would be appealing to me.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the largest retailers of furniture in Australia, with its Nick Scali and Plush brands. Unsurprisingly, demand for sofas doesn't seem to be consistent through the economic cycle, and investors can sometimes become worried about the outlook for discretionary spending.

At the moment, investors are excited again about the prospects of the company – its written sales book is performing well, despite weaker economic conditions. In January 2024, written sales orders were up 3.6%.

Nick Scali has proven to be a great business – it earns a high return on equity (ROE) and typically pays an appealing dividend yield.

If the ASX share is able to expand more internationally – in New Zealand and perhaps other countries – then it could have a longer growth runway than some investors are giving it credit.

The potential store rollout in Australia for Nick Scali and Plush is compelling. Possible growth from its online store could also be helpful in the long term.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of the highest-quality ASX shares Aussies can buy, in my opinion. Bunnings and Kmart have done an exceptional job of growing to their current market-leading positions while achieving large profits and making strong returns on capital for investors.

The last five years have shown how volatile the Wesfarmers share price can be, but it has also demonstrated the strength of the company and its resilient profit.

Its expansion into a sector like healthcare makes a lot of sense because of the ageing tailwinds, and it also brings defensive earnings.

Wesfarmers has been a strong performer for a long time. I'm expecting more volatility in the future, but I'll be there to pounce on any significant declines – I think it's a great ASX share and worth being in almost any investor's portfolio.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Australian Ethical Investment and Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Australian Ethical Investment and Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

What are Soul Patts shares worth?

This company has delivered strong gains. But what is its intrinsic value?

Read more »

Two funeral workers with a laptop surrounded by cofins.
Opinions

2 exciting ASX 300 shares on sale right now

I’m bullish about these exciting businesses.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Opinions

Is it time to buy these 2 beaten-up ASX shares in 2025?

These stocks have dropped this year. Are they some of the best opportunities on the ASX?

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Opinions

Too high? These 2 ASX shares might be due for a correction

These popular blue chips are looking dicey to me.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Opinions

The ASX 200 is approaching its all-time high. Here's why I'm not buying shares

I'm not seeing what the broader market is.

Read more »

Warren Buffett
Opinions

Three ASX 200 shares Warren Buffett could buy

If Warren Buffett had to add three ASX shares to his portfolio, he would likely look at these three top…

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Opinions

Could Soul Patts shares hit $50 in 2025?

This company jumped more than 16% yesterday.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Opinions

3 great lessons I learned being an owner of Brickworks shares

I’m going to take these lessons with me.

Read more »