Stocks To Own In A Fearful Market

| September 19, 2008 | 0 Comments

Our financial industry’s hit a road so rough parts are starting to shake right off the car!  You don’t need me to tell you, the market’s scaring professional and individual investors alike.  The Dow fell 500 points on Monday.  Then it was down another 449 points on Wednesday. Yesterday it climbed back more than 440 points.  And today . . . well, were up (and up big) but will it last?

Lehman’s in bankruptcy.  And AIG became the latest company to be owned by the government.  They get to join Freddie Mac and Fannie Mae as Treasury run institutions.  To pour salt on the AIG wound, Dow Jones kicked them out of the Dow index.  (As they should have.)

Fear’s gripping the markets. . . and It’s getting worse.  I’ll prove it to you.  I’m going to show you a perfect indictor of the fear in the market.

A chart shows the yield an investor can get from the 1 month treasury.  Remember, government bonds, especially those issued by the US government, are the safest in the world.  Investors afraid of losing money put it in government bonds (this drives yields lower).

Yields on government bonds are down 95%.

Massive amounts of cash are being shoveled into these very bonds.  I was explaining this to my brother and his comment was insightful.  “Can’t you get a better yield in a bank account?”  Of course you can.  But investors aren’t trusting banks anymore.

You can also get a higher yield in money market accounts.  But money’s flowing out of those accounts too.  As a matter of fact, Putnam just shut down a $12 billion money market fund.  Why?  Because investors are pulling money out.

This is a huge shift in investor psychology.

Investors no longer care about getting a return on their investment . . . they only care about getting their investment returned!

The Fed and the Treasury are doing all they can.  New initiatives and programs to save financial firms look good at first, but will they work?

Fear’s wrapped its hands tightly around the throat of the market.

What to do now?

I started looking at the markets for some actionable Ideas.  And I stumbled across this one.  Do you know what industry tops the performance tables for the last two months?  Believe it or not the Airlines.  The airline industry’s up more than 26% in 8 weeks!  And it’s all because of oil prices dropping.

So I did a bit more research (Because I hate the airlines).

I found a small group of other industries who’ve outperformed the market by 12% or better.  That’s right.  The market’s been dropping like a rock, and these companies are moving higher.  In the last 2 months they actually posted some impressive gains.

One of those industries was the “Non-Durable Household Products” industry.  It’s up almost 12%.

I know, I know.  What does “Non-Durable Household Products” mean?  It’s basically the group of companies that make products for use around the house.

These are companies lie Clorox (CLX).  They make hundreds of consumer products like Clorox Bleach, Armor All, K.C. Masterpiece BBQ Sauce, and Kingsford.

My personal favorite in the group is Proctor & Gamble (PG).  We’ve mentioned Proctor & Gamble several times over the last few months.  So I’m not going to highlight all the great things about this company.  But I know what you’re thinking.  Why this industry?  Why now?

These companies provide products people need and use every day.  It’s not a “nice to have” product, it’s a “Must Have” product.  The further economic trouble we get into, the better these companies are going to perform.

There’s also another benefit.

These are great inflation plays as well.  Right now, nobody’s talking about inflation.  (I guess that’s what happens when gas prices fall 50 cents.)  But inflation might be a real problem later on in the year.  The Federal Reserve even mentioned inflation in their most recent statement. If inflation returns in any substantial way, these companies can pass along price increases to their customers.

If you’re looking for good investments in a turbulent market or you’re worried about inflation, take a look at these companies.  Over the long run, I’m sure they’ll be a nice addition to your portfolio.

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Category: Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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