Preheat the oven to 350 degrees Fahrenheit. Place a large pot on the stove over medium heat.
Add 8 ounces chopped bacon and cook until crisp, stirring occasionally. Remove the bacon from the pot and drain on paper towels. Set aside. Discard all but 2 tablespoons of bacon fat from the pan.
Season 2 ½ pounds beef stew meat generously with salt,and ground black pepper, and add half of the meat to the bacon fat in the pot. Cook for 4-5 minutes on each side or until deep golden brown.
Remove the beef from the pot and repeat the browning process with the remaining ½ of the meat. Remove the second batch of meat from the pot.
Add 1 ½ cup diced onion, to the pot and season with salt and pepper. Cook until tender and lightly browned, stirring occasionally, approximately 4-5 minutes.
Return the meat to the pot. Add ¼ cup all-purpose flour and 2 tablespoons tomato paste and cook for 1 minute, stirring to coat the meat.
Add 1 teaspoon dried thyme and 4 cups beef broth to the pot. Cover the pot and place it in the oven. Cook for 2 hours.
After 2 hours, remove the pot from the oven and stir in 1 ½ pounds small potatoes, 2 cups carrots, and half of the bacon. Return the pot to the oven and bake for an additional hour for a total of 3 hours of cooking in the oven.
After the last hour of cooking, serve the stew topped with the remaining half of the bacon and 1 tablespoon chopped fresh parsley.