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 could be in 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 to search among the beaten-down banks. In that space, Allied Irish Banks
There's also the investment bankers and brokerages. While Lehman Brothers
Then there are (still) the retailers, trying to survive declining same-store sales and decreased consumer spending. This is where a strong balance sheet is helpful. Gap
Even some big name companies have been dragged down. Merck
Finally, consumer goods and tech have gotten interesting of late. Stalwarts like Procter & Gamble
"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."
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 will you 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.
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This article was first published on Feb. 12, 2008. It has been updated.
Jim Mueller owns shares of Intel and Allied Irish Banks. The Motley Fool owns shares of Legg Mason and Allied Irish Banks. Gap is a Stock Advisor and Inside Value recommendation. Intel and Legg Mason are choices at Inside Value. Allied Irish Banks is a Global Gains recommendation. The Fool has a disclosure policy that believes, deep down, that the market will turn around.