How You Can Win in a Losing Market

With the Dow hitting lows not seen since 2006, you might feel like every stock you own is dropping like a stone. Despite all the red in your portfolio, though, you can always find some companies that buck the trend and rise even in tough times.

Not all energy
You've already seen plenty of commentary about how hot sectors like energy and commodities have done well recently. It doesn't take a rocket scientist to figure out that when prices of oil and food go through the roof, a stock like Marathon Oil (NYSE:MRO) or Monsanto will benefit.

But a company doesn't have to be in a particularly popular industry to put up strong returns. In fact, some recent winners are in sectors completely unrelated to energy, and many of their industry competitors have been hit hard. Here are a few of them, thanks to our CAPS screener:

Source: Motley Fool CAPS.

What have these companies done right? Let's take a closer look, in the hopes of finding common traits they all share. Among such different companies, common aspects may hold clues for discovering similar opportunities.

Marching to a different drummer
Perhaps the most obvious characteristic all of these companies share is that they each have their own story to tell. Unlike energy stocks, most of which are rising in tandem because of higher prices, these stocks have distinguished themselves in a way that helps them stand above the rest of the market.

MasterCard, for instance, is a financial stock, and so you'd expect it to be suffering, like so many of its peers. But MasterCard's business model gives it absolutely no exposure to the credit problems facing most institutions. Moreover, as more consumers resort to credit cards to cover basic expenses, MasterCard actually stands to benefit from a possible recession.

Other standout companies show similar advantages over competitors. Despite fears that traditional hard drives would become a thing of the past, Western Digital has found new applications for its products and created substantial earnings growth -- even as rival Seagate Technology (NYSE:STX) has struggled. Intuitive Surgical has parlayed its unique, revolutionary robotic surgery systems into a place in the S&P 500. And although the iPhone's grand entrance onto the mobile communications scene presents a new threat to its dominance, Research In Motion's BlackBerry has proven itself the cream of the crop among handheld devices.

Knowing what people want
Another trait that many of these companies share is in how they meet the needs of their customers. Each is aware that even when times are tough, people don't want to give up things they want -- instead, they'll look for substitutes to save some money.

With higher transportation costs adding to the price of entertainment outside the home, game makers like Activision are just beginning to tap into an untapped market of new video gamers who want to stay out of their SUVs. Following the same theme, Western Digital has carved a niche with digital video recorders, while the growth in wireless-available entertainment makes RIM's products more useful and desirable.

Above all else, downturns show that the stock market is more than just an index. It's an aggregation of many different companies, and you'll always find leaders and laggards within any group of stocks. Staying on top of prevailing trends and looking for companies that have a proven record of capitalizing on them can help protect your portfolio from the full brunt of a bear market attack.

For more on dealing with a bad economy:

• To make money in this market, you have to be brave.
• Find out why you may never see another opportunity like this.
• Times are bright for value investors.