Over the past 60 years, the United States has seen, and survived, 10 recessions (not counting the one we are 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 although we're in another recession right now -- along with its 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, doomed or not, 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 how the recession is hurting everything from Amazon.com to ZymoGenetics.
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, Bank of America
And if you don't want to invest in some of the more speculative financials like Bank of America or AIG
Then there are (still) the retailers, trying to survive during this recession. The ones that can buck that trend are likely to be the best of breed. Some names include Buffalo Wild Wings
Even some big-name companies have been dragged down. ExxonMobil
Finally, all the talk about lower consumer spending in 2009, and the recession in general, has driven the prices of many other retailers down to enticing levels. For instance, there's Home Depot
"When Buffet 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 -- Buffett and Nygren!) and look at some opportunities?
I know what I'm doing.
Above, I've given some names of companies that have caught my eye recently. But to get a look at companies that have been the subject of much deeper research, check out the last two recommendations and five "best buy now" companies -- seven total -- given just this month at our Inside Value service. Philip Durell and his team look in downtrodden areas of the market, just as Buffett and Nygren advise.
Right now, we're offering a free 30-day trial, so here's your chance to look deeper into this market-beating newsletter.
This article was first published on Feb. 12, 2008. It has been updated.
Jim Mueller owns shares of Buffalo Wild Wings, but not any other company mentioned at the time of publication. Amazon is a recommendation of Stock Advisor, while American Express and Home Depot appear in the pages of Inside Value. Buffalo Wild Wings is a choice at Motley Fool Hidden Gems. The Fool owns shares of American Express and Buffalo Wild Wings. The Fool has a disclosure policy that believes, deep down, that the market will turn around.