Over the past 60 years, the United States has seen and survived 10 recessions (not including the one we are in at present, 19-plus months and counting). From the shortest one -- six months in 1980 -- to the two monster ones 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 had 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 (still) and how the recession is hurting everything from Alcoa 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 a bank -- specifically Wells Fargo
There's also the investment bankers and brokerages. While E*Trade
Then there are (still) the retailers, trying to survive declining same-store sales and lessened consumer spending. This is where a strong balance sheet is helpful. Abercrombie & Fitch
Even some big-name companies have been dragged down. Pfizer
Finally, there are restaurants. Chipotle Mexican Grill
But really, who cares about 2009? For my money, I'm more interested in companies I can buy today and still own in 2014 -- so thanks for the bargains, Mr. Market!
"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 Motley Fool Inside Value service. Philip Durell and his team look in downtrodden areas of the market, just as Buffett and Nygren advise.
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This article was first published on Feb. 12, 2008. It has been updated.
Jim Mueller owns shares of Chipotle Mexican Grill and Yum! Brands. Chipotle is a Motley Fool Hidden Gems and Rule Breakers pick. Pfizer is an Inside Value selection. The Motley Fool owns shares of Chipotle. The Fool has a disclosure policy that believes, deep down, that the market will turn around.