|
Answer:
Dear
BuyandHolder,
In
every phase of the business cycle, even during a recession,
there are winners and of course, some losers. Groups
that continue to do well, even thrive, consist of
companies that sell products and services we must
have. Wall Street refers to them as recession-resistant
industries.
You
can identify some, if not all of them on your own.
Simply think of the things that people cannot or will
not do without. Here are some thoughts to get you
started.
And
as you assemble your portfolio, keep in mind that
old adage, "don't put all your eggs in one basket."
Diversify among industries and then within a given
industry. We also recommend that you keep six month's
worth of living expenses in a money market fund or
bank CDs.
Beverages.
This industry includes alcoholic and nonalcoholic
beverages as well as soft drinks. Sales tend to remain
strong, even during economic downturns. Some experts
maintain that during really tough times, beer sells
better than hard liquor because it is less expensive.
Drugs.
People continue to buy medicines and over-the-counter
drugs. It's difficult, if not plain unwise, to skip
your high blood pressure medicine and it's tough to
survive forever without an aspirin or cough drop.
Food.
We will continue to eat. People under financial pressure
buy staples, of course, but look for less expensive
items and brands. Gourmet and deluxe lines may not
be as profitable. Note: The food industry includes
production, processing, distribution, stores and supermarkets.
Health
Care & Medical Supplies. Industries that produce
drugs, pharmaceuticals and hospital supplies are essential
and especially for our aging population.
Household
Products. We will need soap, toothbrushes and
paste and shampoo along with cleaning products for
washing clothes, dishes and floors.
Telephone
& Telecommunications. Not every company within
this group is likely to thrive during an economic
setback. Look for players that are well run and carry
little debt.
Utilities.
There's always a reliable demand for electricity and
gas. No one voluntarily signs up to sit in the dark,
in the extreme cold or in the extreme heat. However,
utilities with a large component of industrial users
might suffer as businesses cut back.
Waste
Disposal. Garbage collectors and those companies
whose activities are mandated by the government, such
as hazardous waste disposal, sell services that are
needed at all times.
Another
way to invest during hard times is to buy stocks of
companies that have a long history of paying regular
dividends. In a poor market, these stocks tend
to decline less in price than those that are not dividend-oriented.
This is because institutional and individual investors
prize them, hang on to them, and sometimes buy additional
shares when the price is down from previous highs.
Begin
by studying Standard & Poor's Dividend Aristocrats
--
some 55+ companies that have increased their dividend
payout for a minimum of 25 years. You'll find the
list at www.marketattributes.standardandpoors.com.
In the middle of the table, click on "Dividend Aristocrats."
Note:
On a slightly different yet related topic...Knowing
about recession resistant industries is also useful
because they are possible places for employment. If
you and/or friends are unemployed or fear you will
be, why not look for a job in recession-resistant
companies located in your area.
Good
luck!
|
