Do recession proof stocks exist? The answer to that question is very complicated, but they undoubtedly do. What we know is that they do not exist in a market crash. We also know there are companies in sectors, primarily healthcare and technology, that create revenue more consistently than companies in other sectors during a recession. There are also companies with a large enough market share that when the economy does recover, they are well positioned to enjoy the natural recovery of their stock. Examples of these would be General Electric or the Bank of America. Large companies which have 15-30% of the market share in their respective industry will surely bounce back with the economy.
1. Invest in companies with a sizeable market share (15% or more) and have very little chance of making the (negative) headlines in the next 6 months.
2. Invest in both small and large healthcare and technology companies positioned for early growth in the bear market.
3. Invest in sectors which have taken the worst hit in this market crash, but are expected to lead our recovery i.e. real estate.
We are entering a period of prolonged difficult market conditions. Trade and global expansion have been grinding to a halt for months and the outlook is grim. News that global expansion this year will be zero or even slightly below is a very clear sign that no country can escape this recession. The fall in global trade is said to make 2009 the first worldwide contraction since 1982.
In the month of December, China posted its worst export numbers in a decade. In 2009, GDP in China is expected to drop to 7%, its lowest level in 20 years.
Our team is keeping our eyes squarely on lending rates and the banks. We cannot have lending without confidence in the markets and vice versa.
Mr. Mauldin who manages the Millennium Wave Investments Firm in Arlington Texas, stated that, “The reality is that the U.S. and much of the world are going to see their economies shrink at least another year.”
This means that instead of the economy beginning to grow in the latter half of 2009, it will more than likely be sometime in 2010.
Key Fact: The stock market projects the economy 6 to 9 months in advance, which is why things took a very negative turn in September for Wall Street. Main Street has to go through the pain Wall Street has been experiencing and will experience. If the economy recovers at some point in 2010, expect the markets to begin to turn at some point in late 2009.
Bottom feeding season has unequivocally arrived. Companies with superior products, superior technologies or access to market share will flourish in the months and years ahead.
Our team believes that technology and the power of innovation will be the excitement that leads our countries out of this recession. President Elect, Barack Obama will be sworn in as the 44th President of the United States on Tuesday. If he doesn’t get the trillions of dollars in stimulus working for the economy very shortly, expect him to go from hero to zero in a heartbeat.
Expectations have never been higher for a new President, which is why any type of let down will be magnified. As the markets continue to hover not far above the bottoms of late November, our team is searching for the right company who is financially prepared and properly positioned to emerge stronger and with a larger market share; we are looking in the healthcare and technology sectors for our next investment. Expect a report on our latest Featured Company very shortly.
All the best with your investments,