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12 Recession Beaters for 2008

VIEWS: 227 PAGES: 13

									Forbes Gurus

12 Recession Beaters

for 2008


hile economists continue to debate how much the U.S. economy will slow in 2008, several signs do point to a more modest pace of growth. Should growth go negative and the economy slip into recession, investing will get a whole lot more difficult.

Some companies, however, are better equipped than others to handle the inevitable periods of economic weakness. Your best bets are companies with strong brands that sell goods and services needed regardless of the shape of the overall economy. Here are some investing ideas to help you keep your portfolio on track, even if there is a recession.

Guru: Chuck Carlson Newsletter: DRIP Investor Buy: Aflac (nyse: AFL)
Aflac (AFL) offers interesting potential for 2008. The company is the number-one provider of "guaranteed-renewable" insurance in the U.S. and the number-one insurance company in terms of individual insurance policies in force in Japan. Business in both Japan and the U.S. has been solid and should remain strong in 2008. Dividends have grown nicely, with two increases in 2007. The company offers the stability and consistency investors crave during volatile markets. The stock should handily outperform the market in 2008. Investors should note that Aflac offers a direct-purchase plan whereby any investor may buy shares directly from the company, the first share and every share.
Click here for a 30-day risk-free trial of DRIP Investor.

(nyse: AFL)


Forbes Gurus---Best Investment Ideas 2008

Guru: James Stack Newsletter: InvesTech Research Buy: Abbott Laboratories (nyse: ABT)
Abbott Laboratories is a leading player in several growing healthcare markets. As a defensive healthcare play, we particularly like the diversification this company provides. It derives nearly 30% of its profits from overseas markets, while pharmaceuticals account for 44% of sales, hospital products 20%, nutritional products 18% and diagnostics 15%. Abbott Labs has a long history of stable sales and earnings growth fostered by its strong research and development program, acquisitions and global expansion. Currently, Abbott is enjoying double-digit sales growth in three of its four major divisions, and we expect this strength to continue at least through 2008. The story isn't only about recent growth, however. The company has a long dividend history reaching back to 1924. With a current yield of 2.2%, Abbott has increased its dividend annually for the past 33 years. For investors looking for a good defensive addition to their portfolios, this company offers an excellent combination of growth potential and financial strength.
Click here for a 30-day risk-free trial of InvesTech Research.

(nyse: ABT)


Forbes Gurus---Best Investment Ideas 2008

Guru: Jack Adamo Newsletter: Jack Adamo's Insiders Plus Buy: Berkshire-Hathaway Class B (nyse: BRK.b)
Want to take advantage of the subprime debacle, but you're too frightened or don't know how? The ultimate insider, Warren Buffett, does. Every time the market has a sector meltdown, the Wizard of Omaha swoops down like a hawk and picks off great bargains. He made tons of money for Berkshire-Hathaway Class B (NYSE: BRK.b) investors after the tech crash by buying "junk bonds" of strong telecom companies he knew would survive—and tech isn't even an area that Buffett knows well. Financial stocks are his sweet spot. Buffett will snatch up great bargains in distressed securities in the next few quarters. Then, in 2008 or 2009, the company will deliver fabulous earnings, and the stock price will shoot up again. Buy BerkshireHathaway Class-B up to $4,200. Don't let the price scare you. The shares are cheap on a P/E or price/earnings-to-growth basis.
Click here for a 30-day risk-free trial of Jack Adamo's Insiders Plus.

(nyse: BRK.b)


Forbes Gurus---Best Investment Ideas 2008

Guru: Dan Sullivan Newsletter: The Chartist Buy: Intuitive Surgical (nasdaq: ISRG)
This medical instruments maker located in Sunnyvale, California produces minimally invasive surgical systems. Its tools mimic the real movements of the surgeon's hands during surgical procedures. Its primary product is the Da Vinci system and is sold in North and South America, Europe, the Middle East and Asia. On October 18, 2007 the company reported third quarter earnings of $1.04 per share. This beat last year's third quarter by $.59. Earnings per share are estimated to increase 36% in 2008. Five year estimated annual earnings growth rate is in excess of 35%. The company has a $13 billion market capitalization with 38.2 million shares outstanding. Intuitive Surgical has been in a pronounced uptrend since it broke through its 200 day moving average line last February. It has a highly bullish chart pattern and recently broke into record high territory. The stock has skyrocketed 262% so far this year and looks to continue to move sharply higher in 2008. This stock has been one of our top performers since recommending it on October 9, 2007.
Click here for a 30-day risk-free trial of The Chartist.

(nasdaq: ISRG)


Forbes Gurus---Best Investment Ideas 2008

Guru: Peter Way Newsletters: Block Traders' ETF Monitor, Block Traders' Oil & Gold Monitor Buy: CBOE Volatility Index (VIX)
I do not do my investing on a long-term whole-year-speculation basis, since my information comes from volume market-makers and proprietary trading desks that have a much shorter focus. My newsletters on, Block Traders' ETF Monitor and Block Traders' Oil & Gold Monitor , had annualized year-to-date returns through mid-December of +59% and +37%, respectively, on more than 200 picks each. They provide explicit entry and exit prices on each buy. When the price targets are reached, I replace them with new ones. Buy VIX, the CBOE Volatility Index, because it handles trouble well, at $22.68, sell target is $31.17. The VIX quote is the current index price, which can be closely tracked by a "synthetic" in options, so it is fair to use it directly as a performance measure. If there are objections to that, the VIX/8 November future on the CFE was being offered for purchase at $23.20 in mid-December.
Click here for a 30-day risk-free trial of Block Traders' Oil & Gold Monitor.



Forbes Gurus---Best Investment Ideas 2008

Guru: Charles Biderman Newsletter: Trimtabs' Weekly Liquidity Review Buy: KBW Insurance (amex: KIE)
Insurance insiders apparently believe that their employers' shares have been unfairly punished amid the sell-off in financials. According to our sector liquidity dataset, which tracks liquidity data for all Russell 1000 companies, new stock buybacks for insurers total $15.0 billion (2.0% of market cap) in Q4 2007, which is equal to a whopping 64% of the amount of buybacks in financials. Seven of the ten largest buybacks in financials in Q4 2007 have been for insurers, led by buybacks for American International Group ($8.0 billion), Prudential Financial ($3.5 billion), and MetLife ($2.2 billion). The only quarter in which buybacks by insurers exceeded this quarterly level was Q1 2007. In Q2 2007, KIE delivered a return of 5.3%, more than double the 2.1% return of the Financial Select Sector SPDR (amex: XLF). Trading by insurance insiders is also extremely bullish. The 45-day moving average of the ratio of insider buying to total insider trading in the S&P Insurance sector exceeded 25% in the first two weeks of December 2007. Since 2004, this ratio exceeded 25% in the S&P Insurance sector on only three other occasions. Each time, the shares of insurers bounced sharply. The average return of the S&P Insurance sector in the month following days on which IBT exceeded 25% was 4.87%. For comparison, the average monthly return of the S&P Insurance sector since 2004 was 0.55%. Due to the surge in buybacks by insurers as well as bullish insider activity, more aggressive types may want to buy KIE and hedge by shorting XLF.
Click here for a 30-day risk-free trial of Trimtabs' Weekly Liquidity Review.

(amex: KIE)


Forbes Gurus---Best Investment Ideas 2008

Guru: James Stack Newsletter: InvesTech Research Buy: Walgreen Co. (nyse: WAG)
If you are looking for value in this market, it's hard to pass up Walgreen Co. Over the past 10 years, Walgreen's revenue and earnings per share have grown steadily at an average annual rate of 15% and 16%, respectively. Moreover, the company has competitive advantages such as its customer-oriented philosophy, innovation, and acumen in locating its freestanding stores. That should help it to maintain its enviable growth record. Walgreen also presents a strong financial picture, with no long-term debt and strong cash flow generation. At present, the company's stock price is down following a 3.8% drop in 4th quarter profits. In spite of the shortfall, which was a result of lower reimbursement for generic drugs and poor control of expense growth, this was the 33rd consecutive year of record earnings and revenues for Walgreen. We expect the company to quickly address its expense issues. Meanwhile, in terms of price-to-sales and price-to-cash flow, Walgreen's stock is selling at the lowest valuation levels in more than 11 years.
Click here for a 30-day risk-free trial of InvesTech Research.

(nyse: WAG)


Forbes Gurus---Best Investment Ideas 2008

Guru: Vahan Janjigian Newsletter: Forbes Growth Investor Buy: Johnson & Johnson (nyse: JNJ)
Even though shares of JNJ have climbed about 7% above my recommended price in a Special Situation Survey, our discounted cash flow analysis indicates that the shares are still undervalued and it has a strong momentum. The stock is on our buy list for both of our newsletters, Forbes Growth Investor and Special Situation Survey. The company has two blockbuster drugs: Risperdal for treating schizophrenia, and Procrit for anemia. It is not a cheap stock. JNJ sells for about 16 times expected earnings, 4.5 times book value, and 3.3 times sales. But it also provides a decent 2.5% dividend yield, which should help provide some downside protection in a weak market.
Click here for a 30-day risk-free trial of Forbes Growth Investor.

(nyse: JNJ)


Forbes Gurus---Best Investment Ideas 2008

Guru: Ronald Rowland Newsletter: All Star Fund Trader Buy: HealthShares Diagnostic (nyse: HHD)
In 2007, the markets hit a threshold. What began as a banner year for the averages came screeching to a halt in the third quarter due to evidence of defaulting subprime mortgages. Our indicators show these problems to continue throughout next year. Possible recession and rising unemployment also seem to color the horizon. However, hope is not lost. The defensive sectors should be a good play in 2008. Utilities and healthcare look to perform well because of the underlying economic situation in the U.S. One such fund that will capitalize on the trend is HealthShares Diagnostic (HHD). A collection of companies in the medical diagnostic business, HHD is part of a family of funds designed by XShares. Since inception on 1/23/07, HHD gained 30.64% versus the S&P Healthcare Sector Fund's (XLV) 6.62% (as of 11/30/07). In 2008, look for HHD to flourish as the rest of the market takes a rest.
Click here for a 30-day risk-free trial of All Star Fund Trader.

(nyse: HHD)


Forbes Gurus---Best Investment Ideas 2008

Guru: John Reese Newsletter: Validea Hot List Buy: PepsiCo (nyse: PEP)
What's not to like about Pepsi these days? It has star brands like Doritos, Tropicana, Gatorade, and its famed cola, a foothold in several emerging markets, and even the No. 1 ranking on the Environmental Protection Agency's 2007 corporate "Green Partners" list. It has increased earnings in eight of the past ten years, steadily growing EPS from $0.95 to $3.34. And its average return on equity over the past decade is a very strong 29 percent, a sign of good management. Pepsi also has a P/E-to-Growth ratio of 0.99, indicating that the stock is selling at a good price. Its debt/equity ratio, meanwhile, is just 18 percent. Even if the economy lags, Pepsi's huge name recognition, increasing presence in expanding markets like India and South America, and stellar fundamentals should quench investors' thirst for a winner in 2008.
Click here for a 30-day risk-free trial of Validea Hot List.

(nyse: PEP)


Forbes Gurus---Best Investment Ideas 2008

Guru: Janet Brown Newsletter: NoLoad Fund*X Buy: Rydex Sector Rotation (RYSRX)
Rydex Sector Fund is one of the few domestic funds performing as well as diversified international funds. It gained 8.7% for the 6-months and 22.8% for the 12-months ending November 30, 2007. During this time, the S&P 500 lost 2.4% for the 6-months and gained only 7.6% for the trailing 12-months. RYSRX aims to stay invested in the leading areas of the economy. Rydex looks for the highest price momentum to determine which sectors or industries are performing best. The firm's quantitative strategy ranks 63 different U.S. industries each month and invests in the top ranked areas. Recently, the fund has been concentrated (almost 50% as of September 30, 2007) in industrials and materials.
Click here for a 30-day risk-free trial of NoLoad Fund*X.



Forbes Gurus---Best Investment Ideas 2008

Guru: Curtis Hesler Newsletter: Professional Timing Service Buy: Transocean (nyse: RIG)
Long after the last field is discovered—and probably after the last oil well runs dry— treasure hunters will continue to drill for oil. The best potential will be offshore. Last month, Transocean, the world's foremost deep water driller, merged with Global SantaFe, the world's principal shallow water driller. The combination resulted in a new company retaining the name Transocean and the NYSE listing under the symbol RIG. With crude oil recently hitting new highs, rig rental rates will continue to skyrocket in a market with a chronic shortage of rigs to hire. Additionally, there are simply some drilling jobs—especially offshore —that no one else is qualified to tackle. The new Transocean is unique. They are in a business with virtually no ease of entry, and they are on a strong growth path. If I were to buy one stock without regard to price for a long term portfolio it would be Transocean. They are now the powerhouse in offshore drilling.
Click here for a 30-day risk-free trial of Professional Timing Service.

(nyse: RIG)


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