The Best Opportunity This Decade

Over the past 60 years, the United States has seen, and survived, 10 recessions (not counting the one we could be in at present). From the shortest one -- six months in 1980 -- to the two that spanned 1973-1975 and 1981-1982, we've muddled through and come out the other side. In between each, we've experienced, on average, almost five years of expansion.

So while we may be in another recession right now, and we're definitely in a bear market, I'm excited!

Pardon me while I wipe my chin
First, we have a whole bunch of people running around in panic mode crying, "The sky is falling!" They don't want to hold stocks during a recession, so they're willing to sell them -- cheap.

Second, the news media fans the flames of panic with constant stories about weakening consumer spending and the specter of recession.

Third, we've got a handful of really hated companies. Specifically, I'm talking about the banks, thrifts, and builders that caused and are feeling the fallout from the mess we're in.

What does that add up to? Bargains.

Like a kid in a candy store ... and the candy's on sale
One option is one of the ratings companies -- specifically Moody's (NYSE: MCO). Yes, I know it's in trouble from its role in the credit crisis and is now threatened with stricter regulation thanks to that role. But the service it provides is absolutely essential for the modern markets. Its price has dropped over 60% since its high in late May. That mimics declines seen at banks that used its services to sell those "famous" CDOs and MBSs (Citigroup (NYSE: C), for example) and are still entwined in the credit crisis. Heck, if Citi gets cheap enough, I'll even take a look at it. (Even bad companies can be good investments if you get them at the right price.)

Then there are the agricultural companies, which have seen their share prices tumble as commodity prices fell. While they seem to be in trouble now, conservative and well-capitalized firms will survive. Monsanto (NYSE: MON) is clearly in the latter category.

Even some big name staples companies have been dragged down. McDonald's (NYSE: MCD), seller of that staple of the American diet, the Big Mac. The stock rose early this year and then fell off a cliff in October, along with everything else. The staple-seller itself, Staples (Nasdaq: SPLS) is also looking tempting, having fallen over 40% from its August high, with most of that loss in the past month-and-a-half.

Finally, there are your more traditional retailers. All the recent talk about lower consumer spending for the upcoming holiday season has driven prices way down. It doesn't matter if you're a home furnishings supplier such as Bed Bath & Beyond (Nasdaq: BBBY) or a specialty retailer such as Abercrombie & Fitch (NYSE: ANF). But really, who cares about 2008? For my money, I'm more interested in companies I can buy and own in 2013 -- so thanks for the bargains, Mr. Market!

"When Buffett speaks, people listen."
Investing in the above industries might seem counterintuitive now, but Warren Buffett says au contraire:

To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Bill Nygren, another great value investor, agrees. Looking at the current economic situation, he wrote, "What usually happens is that suffering industries begin to recover, the next crisis comes from somewhere least expected, and the cycle of creating new investment opportunities starts anew. We have no reason to believe it will be different this time."

These gentlemen know that investing today in areas that aren't well-liked will position your portfolio for the eventual end of this bear market. There will be another bull market. What we have now is the chance to grab some good companies while they're cheap.

So what are you going to do? Stop investing in stocks altogether, worried that things will be different this time? Or listen to master investors (not me -- Miller and Nygren!) and look at some opportunities?

I know what I'm doing.

Finding value
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This article was first published on Feb. 12, 2008. It has been updated.

Jim Mueller does not own shares of any company mentioned. The Motley Fool owns shares of Bed, Bath & Beyond. That company, along with Moody's, is a recommendation of Inside Value. It, Staples, and Moody's are also recommended in Stock Advisor. The Fool has a disclosure policy.