Well, we're probably on our way out of the recession, even though it doesn't feel like it yet. Just remember: The end of a recession, by definition, is always at the bottom, when things feel the worst.
That will have made 11 recessions over the past 60 years that the United States has seen and survived. From the shortest one -- six months in 1980 -- to the three monsters of 1973-1975, 1981-1982, and 2007-2009, we've muddled through and come out the other side. In between each, we've experienced, on average, almost five years of expansion.
So, even though the market has climbed quite a bit already, I'm still excited about the opportunities as the economy picks up.
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
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 one of the ratings companies -- specifically Moody's
Then there are the agricultural companies that have seen their share prices tumble as commodity prices fell. While they seem to be in trouble now, giving estimates mostly below analyst projections as Monsanto
Even some big-name companies have seen huge volatility in their prices -- McDonald's
Finally, there are your more traditional retailers. All the recent talk about lower consumer spending thanks to higher unemployment has driven prices way down. That has made companies such as home-furnishings supplier Bed Bath & Beyond
But really, who cares about 2010? For my money, I'm more interested in companies I can buy today and still own in 2015 -- 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 past 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 eats at McDonald's and shops at Bed Bath & Beyond, but he doesn't own shares in either. Bed Bath, & Beyond and Moody's recommendations of Stock Advisor. Moody's and Monsanto appear in the pages of Inside Value. The Fool owns a bear put spread on Abercrombie, and Motley Fool Options recommended writing puts on Moody's. The Fool has a disclosure policy that believes, deep down, that the market will turn around.
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