Had the market free fall of 2008 and 2009 not occurred, we might very well have viewed the past two months' market volatility with far more alarm. The fact of the matter remains, however, that unemployment has remained alarmingly high, and there are signs that our economic recovery is grinding to a crawl.
With uncertainty in the air, I went looking for the kinds of stocks that could do well in such an environment. Specifically, I went searching for stocks that either help consumers save money or benefit from low interest rates. My search uncovered five stocks worthy of your consideration and one industry that did well during the last market swoon that you should avoid entirely.
Mom always said it's best to share
Few expenditures take a bigger bite out of your paycheck than a car. Beyond the regular payments, you need to factor in gas, insurance, and maintenance. And if you're buying a car new, your asset depreciated by at least 10% the moment it left the lot.
It's easy to see why one would avoid the purchase entirely, especially now. That's exactly what my wife and I plan to do when we move to Chicago next month. Instead, we'll be locating ourselves right next to one of the city's many Zipcar (NYSE: ZIP ) locations.
For just $60 per year and $7.75 an hour when we use a car during the week, we'll have all our transportation needs met for a fraction of the cost of owning a car. I'm betting we're not the only urban dwellers taking advantage of this value proposition.
We'll also be cutting the cord with our cable as well come moving time. Instead of paying $100 or more per month for Comcast's Xfinity, we're going back to the bunny ears for news and sports. That'll be supplemented by Netflix's (Nasdaq: NFLX ) streaming-only option for $7.99 per month, as well as the occasional trip to Coinstar's (Nasdaq: CSTR ) Redbox machines for $1 rentals on newly released movies. I figure we'll rent about three movies per month, so that brings our grand total to less than $15, a huge savings over cable!
I realize customers and investors aren't too happy with Netflix right now, but I believe the company has smart management that'll continue to push across the globe while signing quality content deals. Furthermore, I think consumers will wake up to the value proposition Netflix really offers at $7.99 once they get a chance to blow off some steam over the company's price hike.
Deals, deals, deals galore!
Much has been made over Groupon's on-again, off-again stance with its IPO, but I think investors are missing a real winner in the deals scene: Travelzoo (Nasdaq: TZOO ) . Should the economy continue to sputter, Travelzoo's deals (both their Travel Deals and Local Deals) will be appealing to both cash-strapped consumers and desperate vendors.
Consumers, taking extra care not to splurge on vacation, will jump on opportunities like this week's offer for an all-inclusive resort in the Dominican Republic for just $11 per day. Vendors, on the other hand, eager to bring in any revenue they can, will turn to Travelzoo and its high-income subscribers to pick up the sales slack ... and gain some return customers in the process.
Free money? Don't mind if I do!
Some residential real-estate investment trusts make their money from low interest rates. Chief among them is Annaly Capital Management (NYSE: NLY ) .
As Fool Ilan Moscovitz explains: "Annaly's business model seems complicated, but it's actually pretty straightforward: Imagine if you could borrow $10,000 at 2%, lend it at 4% to a guaranteed borrower, and keep the $200 difference." Annaly-managed Chimera (NYSE: CIM ) also benefits from such a structure, sans the guaranteed borrower part.
By now it's pretty clear that so long as the economic recovery is stalling, Federal Reserve Chairman Ben Bernanke won't be moving the interest rate from basically zero. That's good news to Annaly and Chimera, as well as investors in these companies.
One sector to avoid
As promised, I'm also offering up one sector -- which did very well during the last recession -- to avoid if things head south again: for-profit education. Though it's not fair to paint with too wide a brush (I picked my favorite in the sector this summer), in the interest of limited space, let's use Corinthian Colleges (Nasdaq: COCO ) as an example.
Between March 2008 and March 2009 (the market bottom), Corinthian's stock rose almost 150%. As more and more working-age folks found themselves out of work, going back to school to further one's education seemed like a wise use of time.
Things, however, have changed since then. Recruiters for colleges like Corinthian are no longer compensated on a commission basis, and they are barred from using misleading facts while wooing students to sign on.
And even if these rules hadn't gone into effect, the schools won't get nearly as many to fall for their ruse this time around: Corinthian -- the worst in the bunch -- had 38.1% of its students defaulting on their loans as of this summer.
Worried about your investments?
If the recent market troubles have you worried, I hope I've presented some ideas worth investigating. In fact, I own shares of Zipcar, Netflix, and Travelzoo.
If you're skeptical of my choices, however, I won't take offense. Instead, I think The Motley Fool's special free report "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke" is definitely worth a look. Inside, you'll get details about two small-cap stocks that have solid deals with the government and have the potential to deliver multibagger returns. The report is yours today, absolutely free!