3 Winning Stocks for a Challenging Year

I have been predicting general market trends for the year ahead, but now let's dig into some actual stock picks.

2009 is definitely going to be an interesting year for investors. Even if the economy's funk deepens -- as many expect -- equities are unlikely to bleed as badly as they have in 2008. There is a lot of pessimism already baked into the stock market's weighing machine.

This doesn't necessarily mean that stocks will bounce back in a major way. However, now is a good time to begin exploring equities that have been roughed up in 2008, yet have a good story to tell in 2009, even if the recession grows.

I have a few to share, just to get the ball rolling. Then I'll ask you to take over.

1. TASER International (Nasdaq: TASR  )
It has been all downhill since "don't Taze me, bro." The company's latest quarter was a stinker. Revenue fell and profits took a precipitous tumble. Inventory levels rose sharply, and that's never a good thing when you have a trendy security product to sell.

The stun-gun maker is also a litigation magnet, and that's always a heavy burden even if the company has a good track record in the courtroom.

So why should anyone expect TASER to bounce back next year? It's about the product. Economic slumps go hand in hand with increases in crime. Folks get more desperate when mouths are harder to feed. Smith & Wesson's (Nasdaq: SWHC  ) stock got slammed after the company reported earnings last week, but the decline was because of a sharp drop in hunting rifle sales. Pistol sales actually rose during the period.

TASER weaponry isn't cheap, but there are reasons why police officers and lay consumers are drawn to the stun guns as a typically non-lethal alternative to stocking up on guns.

2. Dice Holdings (NYSE: DHX  )
It has been nothing but snake eyes since Dice went public two summers ago at $13 a pop. Dice runs niche-specific job sites like ClearanceJobs.com for folks with active security clearance, eFinancialCareers.com in the financial services space, and its namesake Dice.com that specializes in tech job listings.

The stock has tanked since the IPO, but the company is still growing. It has beaten Wall Street expectations in each of this year's first three quarters. Analysts see revenue and earnings taking a dip in 2009, but I don't see it that way at all.

Market-watching firm Challenger, Gray & Christmas predicts that more than a million jobs will be cut next year. Even companies that appear to be doing well are tightening their belts and announcing layoffs.

This may not seem like a cheery scenario for a company like Dice, but it's actually the perfect growth catalyst for companies like Dice and larger players like Monster and Yahoo!'s (Nasdaq: YHOO  ) HotJobs. The unemployed are looking. The employed are nervously networking. It's a good time for Dice.

3. Netflix (Nasdaq: NFLX  )
I have already made my case for Netflix as a winner in a recession. Subscription-based products are typically early cuts in the belt-tightening process, but Netflix is different. Its unlimited, home-based DVD rental model is just the ticket to see homebodies through the downturn.

Netflix offers an attractive value proposition, and that's before we even consider the company's broadband streaming of 12,000 titles that it offers at no additional cost to subscribers.

Companies that provide cheap cinematic escapes like Netflix and Blockbuster (NYSE: BBI  ) should make out nicely during the economic lull.

The market apparently agrees. Unlike TASER and Dice, which have shed more than half of their value in 2008, Netflix is that rare bird trading higher.

 

Dec. 31, 2007

Dec. 19, 2008

Change

TASER

$14.39

$4.99

(65%)

Dice

$7.99

$3.73

(53%)

Netflix

$26.62

$27.69

4%

It's your turn now
There are many ways to play the recession, of course. Food and health-care stocks are typically seen as defensive plays. Some feel that a widening funk will lead to a diminishing dollar, so foreign stocks and gold may be in order. Naturally the most ardent bears will just short stocks, buy puts, or roll with bear-centric exchange-traded funds.

What are you buying to brace yourself for 2009? I want to know. Post your thoughts in the comment box below and I'll come back in a few days to discuss your best ideas.

Other stories to read before the ball drops:

TASER International is a Motley Fool Rule Breakers pick. Netflix is a Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't mind taking out the crystal ball from time to time, if only to dust it for fingerprints. He does not own shares in any of the companies in this story, save for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 22, 2008, at 5:38 PM, javnnf wrote:

    How does a company like Dice make earnings when the jobs are decreasing?

    Who adds to the earning of Dice--- the job seeker or the employer?

  • Report this Comment On December 22, 2008, at 6:15 PM, TMFBreakerRick wrote:

    Javnf, even Dice concedes that hiring activity will slow next year:

    http://www.diceholdingsinc.com/phoenix.zhtml?c=211152&p=...

    The key here is that while online recruiting may hit a bump -- as can be said for nearly all ad platforms -- Dice is in a good position to make it up in volume, since traffic should grow nicely as folks either seek out new jobs or start networking in vertical portals like Dice.com, where ads go up.

    So actual job postings may go down, but the online resume and peer-to-peer activity should drive traffic way higher, especially in a growing niche like tech (which accounts for two-thirds of Dice's revenue mix).

    This recent presentation is pretty informative:

    http://library.corporate-ir.net/library/21/211/211152/items/...{7B3C9166-9AEA-409B-BDAE-557666EA972F}_DHX121008.pdf

  • Report this Comment On December 22, 2008, at 11:25 PM, predfern wrote:

    Here are the stocks I am considering for 2009

    BOOM

    CFSG

    CRNT

    DWSN

    EDU

    GWR

    HURC

    LNDC

    LOOP

    MR

    NUAN

    OYOG

    QSII

    UA

    VLCM

  • Report this Comment On December 23, 2008, at 12:24 AM, huibs wrote:

    ..GRMN with their GOOG phone..

  • Report this Comment On December 23, 2008, at 7:20 PM, mikea01 wrote:

    acfn-diversified infastructure

    good bottom start and cheap.

  • Report this Comment On December 31, 2008, at 2:25 PM, ottoritter wrote:

    hear astm is to be aquired by larger stem cell co. anyone else hear this ?

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