5 Quick Picks For A 2013 Recession

Dec. 31, 2012 9:28 AM ET, , , , , 7 Comments
Clinton Holmes
189 Followers

Many watching the market are concerned that regardless of the outcome of an attempt to avoid the fiscal cliff there will be a recession in 2013.

Without a doubt, a recession would be unwelcomed by investors with a short investment horizon (1-3 years), but for those with a longer investment horizon, say 3+ years, it could be a great opportunity for profit. So what should potential investors do to prepare for this opportunity? Three things:

  1. Accumulate cash and review your portfolio
  2. Identify sectors that will see market prices depressed in a recession
  3. Find the stocks within the sector with the best fundamentals

Accumulate cash and review your portfolio

This does not mean sell off your portfolio; it means do not buy more stocks for now. If a recession in 2013 happens, you want to have cash ready to scoop up stocks for cheap. Hedge funds started doing this as early as August and continued into October.

It also makes sense to review your portfolio. Again, the idea is not to sell off your entire portfolio. The idea here is to prune the portfolio of any investments that no longer look attractive if we were to see a recession in 2013. If the reason why you invested in a particular equity is not affected by a short or long recession, then feel free to ride it out. The purpose of this review is to reduce or eliminate positions whose underlying reasons for purchase are impacted by a 2013 recession.

Identify sectors that will see market prices depressed in a recession

From 2009-2010, the 10 industries hit hardest by the recession (from worst to least) were:

  1. Building material and supplies dealers
  2. Home furnishing stores
  3. Lumber and other construction material wholesalers
  4. Other motor vehicle dealers
  5. Cement and concrete product manufacturing
  6. Newspaper, periodical, book, and directory

This article was written by

189 Followers
My goal on Seeking Alpha is to share my decade of individual investor experience with the community and hopefully learn something new from the community hear. I'd really like to learn about options and technical analysis. I primarily take a Buffet approach to stocks. I look for companies with strong balance sheets, good management, and a wide moat to park my money in. I've also been known to dabble in some Graham cigar butt style stocks that are extremely undervalued by the market. Look forward to hearing hearing your comments on my articles. Please feel to message me with any questions.

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