Over the past 60 years, the United States has seen, and survived, 10 recessions (not counting the one we may or may not be in at present). From the shortest one of 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 entering another recession right now, 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 an investment company -- like Goldman Sachs
Then there are homebuilders. While some might go bankrupt, conservative and well-capitalized firms will survive. MDC Holdings
Then there are the materials suppliers, such as USG
Finally, there are retailers. All that talk about lower consumer spending in 2008 has driven prices way down. It doesn't matter if you're a building retailer such as Home Depot
"When Miller and Nygren speak, people listen."
Investing in the above industries might seem counterintuitive now, but Bill Miller of Legg Mason says au contraire.
[Several] years ago, everyone wanted tech and Internet and telecom stocks. ... The time to buy them was in 1994 or 1995, when they were cheap. But in 1994 or 1995, people wanted banks and small and mid caps, which should have been bought in 1990, and well, you get the picture.
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."
What these gentlemen know is that investing today in areas that aren't well-liked will position your portfolio for when we come out 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 and I can hardly wait.
If you'd like some help in figuring out if a beaten-down company is worth investing in, take a look at our Inside Value service. Philip Durell and his team look in downtrodden areas of the market, just as Miller and Nygren advise.
Since the newsletter's inception, their picks are beating the market; plus, you can see the stocks they're recommending today for free with a 30-day trial.
Jim Mueller owns shares of USG and American Eagle, but no other company mentioned. The Motley Fool also owns shares of American Eagle. USG, Legg Mason, and Home Depot are Inside Value recommendations. American Eagle is recommended in Stock Advisor. MDC Holdings is a Motley Fool Hidden Gems pick. The Fool has a disclosure policy.
More from The Motley Fool
4 Ways to Save More in Your 401(k) in 2018
Annual 401(k) contribution limits are going up next year, and it pays to take advantage.
How 1 Senator Got a Bigger Tax Break for Families
Pressure led to an increase in a key tax credit. Find out more about it here.
Crude Oil Prices Went on a Wild Ride in 2017
While crude prices are on pace to end the year higher, the journey has been interesting -- to say the least.