|
Top bear-market stocks
|
 |
November 9, 1998: 9:46 a.m. ET
Food and drug companies are among the better performers in bad economic times
|
NEW YORK (CNNfn) - No matter what's happening on Wall Street, smokers gotta light up.
And regardless of whether the economy is in a deep freeze, sick people swallow medicine, taxpayers file 1040s and teen-agers hog the phone at home. Life goes on.
So if you believe the U.S. stock market is heading into a bear market in 1999, then perhaps you should consider some stocks that analysts say will weather a downturn better -- things that people don't give up in bad times.
"You're going to buy Campbell's soup whether or not you have a job," said Al Goldman, chief market strategist at AG Edwards in St. Louis, Mo.
Bears out of hibernation?
A stock market correction sent the Dow Jones industrial average tumbling nearly 20 percent this summer.
The benchmark index has recovered somewhat, but is still off 7.99 percent as of Oct. 30 from its high of 9,337.97 on July 17. Markets from Russia to Latin America writhed as the Federal Reserve and other countries cut interest rates.
There's enough conflicting signs that bulls and bears have plenty to argue about. Some say the market will rebound, others say it will continue to struggle. Some analysts have even warned of a recession in 1999.
Hugh Johnson, chief investment officer at the brokerage First Albany Corp., said one of the best bets in bearish times is tobacco, despite its politically-incorrect reputation. He thinks the only stock worth buying is Philip Morris Cos. (MO).
"Tobacco is the best performing industry in every single bear market," Johnson said.
Utilities stocks are another big winner, but investors have to be careful to choose companies that don't pay out more than 90 percent of earnings in dividends. He likes Texas Utilities Co. (TXU) and Northern States Power Co. (NSP).
Johnson recommends Campbell Soup Co. (CPB) and Hershey Foods Corp. (HSY); and household products companies like Procter & Gamble Co. (PG) and Colgate-Palmolive (CL).
Likewise, drug giant Warner Lambert Co. (WL) is a good bet, along with Abbott Laboratories (ABT), a healthcare products and services company.
Cash flow and household names
Mark Trautman, portfolio manager at the MSB Fund (MSBFX), recommends people buy companies that are familiar names. The fund invests in companies that do well in bear markets.
"They'll be more likely to stick with the stock for a long time if they know the company, and they won't rush to sell it if times get bad," Trautman said.
Trautman also said investors should study the earnings and cash flow of a company over 10 years. A business with a long track record is likely to weather a recession well.
"We like to stay with well-defined companies with a history," Trautman said.
For example, investors who think the Internet will be big might be tempted to own online service giant America Online (AOL). But Trautman thinks AOL is still too new. So he prefers big names that will benefit from the Internet, such as Intel Corp. (INTC).
"You need a computer to get onto the Internet," Trautman argued.
Keep in mind, too, that good companies sometimes have short-term problems. For example, media titan Walt Disney Co. (DIS) said its profits skidded 24 percent in its fourth quarter, but Trautman thinks the company is a great long-term investment.
But not everybody agrees that bears should be hiding in so-called "safer" stocks.
Goldman, who describes himself as a bull, thinks worried investors should think twice about equities at all.
"If I were bearish, and I'm not, I would sell stocks and hold cash," Goldman said.
Then again, Goldman acknowledged, in a bear market everybody still needs toothpaste. 
-- by staff writer Martine Costello
|
|
|
|
|
 |
|
