4 Stocks That Will Lead Us Out of This Mess and Dominate the Decade

|
 |  Includes: AAPL, AMZN, CSCO, F, HPQ, RL, SBUX, UDR, WFM
by: SA Editor Rocco Pendola

Regardless of what comes out of the latest fiscal crisis, stocks will continue to trade. If you select the right ones, you will make money. Don't listen to those who say otherwise. Over the long haul, it's always a stock picker's market.

Even if a bull market resumes, there's no guarantee that the stocks you bought for a "bargain" will appreciate in price. This sounds obvious, but it warrants a mention. You often hear people say, when this or that happens, "stocks will do well." That's a generalization because some will not do well. Consider how Cisco (NASDAQ:CSCO) and Hewlett Packard (NYSE:HPQ) fared as the 2008 financial crisis unwound.

I believe the following four stocks will lead the way out of this mess. And, if for some reason, we're in for a bearish decade, these picks will still rise to the top. An interrelated and unified set of themes tie these companies together: They'll do well because they focus on the high-end, often in urban markets, particularly those on either coast.

Go ahead, call me an elitist West Coast snob, I love the label. It keeps me motivated. (Insert smiley face with a smirk).

Apple (NASDAQ:AAPL): I included AAPL in the above-linked article and it's worth mentioning one more time. This fall, Steve Jobs will unveil iPhone 5. Surely, a new version of iPad will enter the market sooner or later. Macbooks will get refreshed. And Apple TV (the real deal) might even see the light of day.

Even in a bad economy, count on Apple to keep selling gadgets. The struggling masses will make an Apple product a priority, even if it means Top Ramen for a month. And count on the high-end consumer to continue to come through.

It's all about wants, not needs. People do not need iPhone 5 (version 4 works just fine), they want it. Not many companies find themselves in this position of delivering products that produce pent-up demand no matter what's going on with the economy.

The strategy of selling AAPL $350 puts continues to work like a charm throughout this mess. The worst thing that can happen here - you don't get put shares and you're not long AAPL. If you do not have the cash or account equity to pull off put selling, you can initiate a bull put spread. For instance, you can sell a $350 put and buy a less expensive $340 put in the same month. You keep the credit and only need account equity to cover the difference between the two strike prices.

Polo Ralph Lauren (NYSE:RL): I've been on a high-end retail kick lately. And it's not going anywhere anytime soon. Add Polo to the list. As fellow Seeking Alpha contributor Benzinga said so well, "Ralph Lauren" is "The Epitome of Luxury."

Polo Ralph Lauren Corp. (RL) reported (blowout) earnings this morning that clearly show the difference in the two consumers in this country: the very wealthy and the very poor.

So very well-stated.

It's a sad shame it has to be this way. I'm not a fan of suggesting that investors exploit the effects of inequality, but people invest to make money. And the fact Polo can crush earnings estimates during these times only reinforces what you learned about capitalism in college. Simply put, the system requires, and will always have, poor people and very rich people who can do things the rest of us can only "aspire" to. As such, companies like Apple and Polo will continue to clean up on high rollers as well as the remaining "aspirational" consumers with buying power (i.e. plastic).

Ford (NYSE:F): Ford's sales and marketing chief said something the other day that, unsurprisingly, given the market meltdown, went largely under the radar:

The people buying cars now are the highest-income people ... They want the newest product. And so, I think the new era we are seeing, I don't want to say it's European-like, but it's a lot of manufacturers with equal share, and great products and we're competing on largely who has the newest product ...

There's not only lots of vision in that statement, but a solid handle on the type of consumer whose driving the ship. Everyday Low Prices are a thing of the past. That never was and never will be a sustainable business model. It's about delivering high quality products and services to consumers you do not have to nickel and dime and who will not nickel and dime you and squeezing every last drop of disposable income out of them. Amazon.com (NASDAQ:AMZN) has made a living at this and it appears Ford gets it as well.

Now, of course, the question is can Ford not only deliver products "the highest-income people" deem worthy, but can the company have "the newest (or at least, hottest) product" going forward? I'm on record as stating that Ford can.

UDR, Inc. (NYSE:UDR): I found my soul mate while reading an article in The Wall Street Journal the other day. Here's what UDR CEO Tom Toomey told the newspaper:

We think it's a good time to buy New York ... The financial district is coming back ... The restaurants will come. The retail will be there. With all that vibrancy, I think it's going to be a great spot to have rental properties.

This outlook echoes my somewhat bearish thoughts on recent IPO Teavana (TEA) and my bullishness toward the trend of major retailers looking to locate in metropolitan cores.

Not only is UDR loading up on Manhattan residential property, but it, as The Journal notes, "decided to pull out of much of Middle America to focus on coastal cities where younger renters would pay more rent." Amen. Shrewd and brilliant (expletive with an "ing" at the end) move.

If you do not live in an affluent region of the country (many of them just happen to be on either coast), you live on the endless outskirts of the bubble I live in, here in tony Santa Monica, California. Or the bubble the "younger renters" reside in, not only in Manhattan but in places like San Francisco and Boston where grads from the best colleges work in finance, tech and biotech.

People spend money in these bubbles and they view rent as an investment. The old notion of "you're throwing your money away every month paying rent" died hard in 2008. You pay more to rent in Manhattan or San Francisco or Boston or Santa Monica not merely because of the dwelling you borrow every month, but because the urban environment you inhabit contains amenities that you either cannot get elsewhere period or that you cannot get elsewhere in such close and convenient proximity to where you hang your hat.

Toomey understands the urban appeal. He understands that as residential pops up in one of a great city's last available neighborhoods, people will come. Retail outlets like Teavana should heed his words and do what Whole Foods (NASDAQ:WFM) has done, for example, and saturate places like Manhattan.

Being urban and going high-end. It's a combination that works and will work for many companies. And it's a one-two punch that will keep your portfolio way above water no matter what the second decade of the 21st Century brings.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in UDR, AAPL, WFM over the next 72 hours.

Additional disclosure: I am long F March 2012 $16 call options.