In a recession, most professionals suggest that investors take a defensive posture.
That theory states that buying stocks with great balance sheets and stable cash flow is a way to withstand the downdraft of a bear market. If you own stocks of companies with products that consumers have to buy, you can expect to beat the market performance-wise.
Again, this bear market has been different in many ways. Even the most defensive stocks are losing value in a big way. None of it makes sense.
One sector that should be insulated during a recession is the food space. We have to buy food, right?
Specifically, I want to own stocks of companies that are leveraged to the agriculture space. That means fertilizer, and names like Potash (NYSE: POT).
As hedge funds were forced to liquidate, shares of POT dropped at a time when they should have done well relative to the rest of the market. The selling creates an opportunity for investors looking for recession-proof stocks.
Buy Potash, and let others worry about the recession.
Click here for the full list of recession-proof stocks.
Jamie Dlugosch is a contributor to InvestorPlace.com.
Closing Bell: Dubai sends jitters throughout the market (S, BBY)
Heinz looking good after the second quarter?
Why isn't Bank of America updating its shareholders on CEO situation?
Reader Comments (Page 1 of 1)
6-25-2009 @ 1:44AM
InteractMD.com said...
Great--so this "recession-proof" stock just tanked last week, down 20 dollars or more in less than five days. Reason? Decreased orders. Why? The recession.
Look, I bought 200 shares two weeks ago on the "recession-proof" argument. Great stock, right?
Probably was way overvalued to lose that much steam over some crummy news. Shows again that investors need to buy stocks not based on the narrative, but based on the numbers.
By the same "people gotta eat" argument you make, all agriculture is an equally good investment, yet as in any other industry, some companies will do well and some will fail. Is breathless hype such as your post to take the place of rational guidance in selecting good companies for investment?
Jim Cramer would be proud.