This economic downturn has left no sector or exchange traded fund (ETF) untouched. Even traditionally defensive areas of the market got eaten alive. But there are still corners of the market that are demonstrating potential while nearing short-term trend lines.
The Motley Fool on MSN Money suggests seven stocks that have managed to hold up relatively well in the recession. These are taken from CAPS data that have rated four and five star companies who have outperformed the market and have higher than usual annualized gains.
Many of these stocks are components in ETFs, too, so there’s a way to get broader access to them.
- Colgate-Palmolive (CL), consumer staples; and PepsiCo (PEP), snacks, soft drinks. Both are components of PowerShares Dynamic Consumer Staples Fund (PSL) – Colgate is 2.6%; Pepsi is 2.4%
- Altria Group (MO), focuses on cigarettes, tobacco and Phillip Morris International (PM), cigarettes. Vanguard Consumer Staples (VDC) holds 3.2% of Altria; 14.8% of PM; 7.3% of Pepsi and 2.9% of Colgate.
These companies display sustainable earnings and have decent debt positions, two important factors to consider during a recession. Cash flow also is a big plus. And of course an exchange traded fund(ETF) is a better play because there is more diverisification and the risk is spread out over a basket of companies, rather then one.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.