Douglas McIntyre at 24/7 Wall Street argues that, as times get rough, some of the following industries will thrive. His first picks are basically value plays: home-builders and financials. These stocks are so beaten down, his argument goes, that they have no where to go but up:
Among the most unlikely candidates for a big rebound are housing stocks, but, one of the hallmarks of a recession moving toward a recovery is first stability and then a rebound in home prices. Wall St. could make the case that home-building stocks have nowhere to go but up, at least for those which remain independent businesses.
Fair enough. But forgive us if we sit through a few more dreadful Housing Starts and land-writedowns before we try to call that bottom.
Next come “Healthy-living” and casual dining/fastfood:
One sector that goes out the door when times get tough is the “healthy living” sector. When smoking stays high and drinking goes up, what else would you expect? But people can only live off of cheap food, beer, and tobacco for so long. The second things start looking better economically these stocks should have already started recovering.
Plausible, but we’re not sold on the “healthy food” call. Seems to us like the last thing you’re going to do after you lose your job and house is buy granola bars. The first thing we’d buy would be a six-pack and a few slices of pie.
Finally we come to Retail Apparel:
the current economic environment is bad for most retail names, but it particularly hits mid-level and upper-middle level retail giants that have to still maintain inventory while many of their customers go discount shopping at clearance stores or at smaller chains. While clothing expenses can be pared down for some time, it’s highly unlikely that eighteen months out we’ll be in an economy of loin cloths and flip-flops.
OK, maybe. But it seems to us that McIntyre is missing the most obvious plays of all: Wal-Mart (WMT). Wal-Mart, unlike many of its competitors, also has a degree of international exposure. Look for Wal-Mart to come out of this recession in the best competitive position its ever been in.
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