Recession-proof stocks

Andy, et al,
We’re not in a valley just because history says we should be gearing up for a rebound. That is assuming this is an equities based recession, it isn’t. We traded that relatively easy recession for a much worse housing based recession which “historically” tend to be twice as deep and twice as long of a contraction as an equities based recession. This is going to take a while. Eventually the Apple fad will weather and eating and driving to work will trump iPhone sales.

Financials will eventually be a good buy, but they are still busy diluting their share base raising equity. They are obviously not telling us the whole story if they are selling their stock at a 12-40% discount in exchange for excess capital. That tells me the assets on their books are over valued and/or they are gearing up for worse times. Consumers may not be smart enough to cut back on spending and increase their savings, but the banks have learned their lessons, the really hard way, and can’t afford to count on people paying their credit card bills.

Guy – you’re talking about high priced stocks at a market PEAK, not a valley. Completely different situation.

First of all – to the guy who thinks its irresponsible to suggest bargain hunting in today’s market … do you get off on seeing people stay poor? Are you one of these doom & gloomers that insists that cynicism is somehow a good thing for economy? Because I have a hard time believing that it’s simple stupidity.

The Dow will hit 18,000 by Q3 of 2011 (and that’s a conservative estimate) which means, you’re essentially going out of your way to take money out of my pocket. When you play with my money, you’re playing with my emotions so now I’m pissed off.

The only thing “irresponsible” here is saying “you will lose your shirt on Apple”, because of a singular analyst estimate (that essentially expires in 8 months) without understanding the timeline of the individual investor’s realization of gains. Are you REALLY suggesting that I will lose my shirt if I buy Apple now, with the expectation of realizing gains in 2011? The reference to earnings was merely an illustration of a company that is earning IN SPITE OF an economic slowdown. Thus, it would be ignorant to think that same momentum won’t be (at least) sustained, if not grown exponentially, in the period of growth following the downturn. Especially in the retail technology sector.

As far as your 5 year high sentiment. I hope you followed that philosophy back in 96′ when Apple hit a “5 year high” of $30 a share. That might have been the single most foolish statement I have ever heard in my entire life. CNN Money should pass out Economic Idiot of The Week Awards and make you the inaugural winner. At least you’ll get *something* out of this market, since you’re hell bent on not actually getting paid.

I’ll even take it a step further than Paul and suggest bargain hunting financials. Yes, FINANCIALS. Companies like Wamu, JP Morgan, BofA, etc. have been absolutely battered by the credit crunch and have been devalued 12-18 months out, in anticipation of more writedowns and losses. Forget the buyout/bailout game for a minute … even the potential for RAPID growth on the backside of this downturn is tremendous. These organizations have strong foundations, significant shares in their respective markets and in most cases, have already established streams of capital by way of private cash infusion and in the cash of JP and BofA, are actually looking to EXPAND their portfolios in other areas of lending. If you’re willing to roll the dice a bit for a huge potential in gains, are willing to wait 24, even 36 months before it’s realized, and your portfolio already features blue chips in other sectors, I would suggest taking a flier on a financial.

Well taking a look at the examples you provide of stocks that people would have “lost out on” had they avoided because they were at their 5 yr high, had people used that rational in 1995 they would have lost out on some very nice returns indeed. But say you used that same rational in 2000, you would have avoided an 8 year return that would certainly make even putting cash under a mattress a better investment Wal-Mart: -10.5%;
Microsoft: 2.7%; Cisco -64.8%. Your examples only prove that there are times when the stocks of great companies can be too expensive to buy.

I’ve made a choice to become more frugal for reasons that have little to do with the overall economy or my own current income level.

One thing I’ve noticed is that, at the grocery store, consumers are being hit with a triple whammy this year. First, commodity prices like oil, pork bellies, corn and soybeans have gone up dramatically, which trickles down into many food products and most shipping costs. Second, greater vigilance against food-borne illness seems to be prompting more and bigger product recalls. Both of those I understand. But finally, and what I don’t understand, many products are being completely replaced on the store shelves by their “organic” or “natural” equivalents, which adds an easy 20-50% to their price.

It seems strange that at a time when many consumers are supposed to be feeling the pinch, there is such a sudden, dramatic increase in the demand for more expensive “organic” products, particularly to the extent of crowding out the much cheaper traditionally grown products. That is not the way markets usually work.

I’d love to see some analysis on why this is happening. Did California ban traditionally grown products, thus effectively controlling the market? What happened? As someone who regards the whole “organic” movement as largely a fad or a superstition, I’d like to know why it is that my grocery budget is being severely challenged in this way, as cheaper traditionally grown products seem to be disappearing from the shelves.

Alexis, thanks for the email. But the points of the article were to A: show that some consumer-oriented companies are still growing rapidly and that B: there are bargains. I never claimed Apple was a bargain. I just used them as an example of a company still posting strong growth. Also, isn’t it dangerous to ignore a company just because it’s near a 5-year high? If a stock is still trading at a relatively reasonable value and is growing, you shouldn’t ignore it just because it’s gone up. Imagine how many people would have lost out on stocks like Microsoft, Cisco, Wal-Mart, etc. if they came to the conclusion that they can’t go any higher because they are already at a high. Investing is inherently risky. But with this piece, I tried to give some readers examples of companies that are not going to cause people to enter “financial ruin.” Anyway, take care and I do hope you keep reading.

PRL

Why would you lead your article with a paragraph about Apple when it doesn’t qualify for your list? The 2008 average analyst estimate is $5.15 which is makes it too expensive at 30x earnings.

Very misleading & deserves a retraction explanation. I could imagine lots of people mistakenly buying Apple and losing their shirts based on this.

Also: your concluding sentence “shop till you drop for consumer stocks” is insanely bogus. It’s cute. And it’s dangerously wrong.

I don’t know if anyone pays attention to foolish articles like this, but if they do then you should be held personally liable for their financial ruin, and Yahoo Finance along with you – your weasel worded “do your homework” not withstanding.

And what do you mean “there are good sales out there”? You list HNZ, CAG, ITY, NKE, DTV — are all trading at or near 5-YEAR HIGHS. Sure, FOSL is off it’s spike, but it’s still double what it was 18 months ago.