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ContrarianProfits.com (http://www.contrarianprofits.com/) is a financial news and opinion website with a twist. As investment guru Rick Rule puts it, “You are either a contrarian or a victim.” In the financial world, most people are losers because they just don’t know what game they’re... More
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  • How to Find Great Stocks During a Boom or Doom Period  0 comments
    Jun 4, 2009 5:40 PM

    This weekend, I’ll be speaking at the Mt. Vernon Research/Investor’s Daily Edge “Boom & Doom” conference in South Florida. During my presentations, I’ll offer the attendees my top five stocks that I believe will fare well, no matter whether we’re in a depression or expansion. Now, it wouldn’t be fair to the paying customers if I give you those top five stocks here. But what I can do is provide you with the stockpicking method to my (some say considerable) madness…

    A Fat Pipeline… And An Even Fatter Dividend

    Several of the stocks are in the healthcare sector - my specialized area of expertise.

    Not only do I cover that sector for Mt. Vernon Research, I also believe that owning the right healthcare stocks is crucial for having a well-balanced portfolio.

    While President Obama’s goal to make healthcare affordable for every American is noble, it’s difficult to execute even in the best of circumstances.

    And since he won the election, I’ve said that achieving this in the midst of a nasty recession and two wars is going to be even more challenging. I suspect the healthcare landscape isn’t going to see any dramatic changes over the next few years and I don’t foresee socialized medicine in the United States.

    For that reason, one of my choices for the “Boom and Doom” portfolio is a large-cap pharmaceutical firm that boasts a deeper drug pipeline than its large-cap brethren. Run by a shrewd financial management team, the stock pays a safe and fat dividend. You’d need to buy a junk bond to find a yield this high.

    Even if markets fall off a cliff, this stock’s dividend should help take away some of the sting.

    Two Flourishing Small-Caps With Key Stock-Moving Catalysts

    My other two healthcare picks are small-caps.

    When I analyze small-cap healthcare stocks, I’m looking to find companies that have revolutionary products. And if those products have a reasonable chance of success, I’m willing to take on some additional investment risk.

    That means when I put out a recommendation on a company’s stock, I need to be confident that it will at least double if my thesis proves correct.

    The first company is working on a vaccine that not only has the potential to save millions of lives, but also billions of dollars in our healthcare system.

    It has plenty of cash on its books (a very important variable when cash is scarcer these days) and is ahead of its competitors in the development of the vaccine. And while it’s a speculative position, it’s a company that should be rather immune to a “boom or doom” scenario. The bottom line is that if the vaccine works, the stock is going to blast off, no matter what the economy or Dow is doing.

    My second small-cap pick is a tiny company that makes a new medical device that has no competition in a $1 billion market. Not only is its technology superior to others, the company is also in the process of signing up an exclusive distributor. Once that occurs, revenue growth should be off to the races. What’s more, this company is profitable, cash flow positive, has plenty of cash and no debt.

    A Mega Moneysaver With Little Competition In A Critical Industry

    The next two companies help others save money - a vital quality during difficult economic times.

    The first one works in an industry that is arguably the most critical in the world - because without it, nobody would even be alive.

    With water shortages already impacting millions of people all over the globe - and set to affect many millions (if not billions) more in the coming years, this small-cap firm is crucial, as it saves governments, utilities, and companies roughly 60% of the cost of addressing the problem.

    This stock is perfect for a “Boom and Doom” portfolio, as water shortage problems can’t wait until the economy recovers or there is more money in government coffers. Water projects are essential and many of the large ones were funded before the credit crisis clamped down on capital.

    And because this company not only help saves a ton of money on these critical projects and has little to no competition, you don’t get a better recipe for success than that.

    A Massive First Mover In The Telecom World

    My last recommendation enjoys such enormous “first-mover” advantage (i.e. the first company of its kind in a given field) that although it’s now starting to face more competition, it’s going to be difficult for rivals to grab market share.

    The company is a key player in the telecommunications industry and boasts 9 of the 10 largest carriers as its customers. It’s active in over 100 markets around the U.S.

    And it’s easy to see why it’s an attractive firm. Not only does it relieve its large telecom customers of logistical headaches, it also saves them huge wads of cash.

    Already profitable and cash flow positive, with mountains of cash in the bank and a tiny amount of debt, the company’s growth trajectory looks like a hockey stick. And earnings are expected to grow 24% per year over the next five years.

    Three Elements That Make Up The Perfect “Boom And Doom” Stocks

    With the exception of the large-cap pharma firm, these companies all have three common denominators…

    1. Leading Position In Their Industries: They’re all way out in front of the competition, or have none at all.
    2. Rock Solid Balance Sheets: This is important, as it means if the doomsday scenario hits, I don’t have to worry about where they’re going to get the capital to keep the lights on. Moreover, healthy balance sheets will help the companies acquire rivals and accelerate growth when the opportunity arises.
    3. Game-Changing Technology: When these technologies catch on, the growth is often explosive - and so are the stock prices of the innovative companies that created them. And because it’s also often a reason why there is no competition, investors have the profits all to themselves.

    If you’re attending the Mt. Vernon Research/Investor’s Daily Edge “Boom & Doom” conference, I look forward to meeting you and sharing more about these companies with you. If not, I invite you to sign up for the Xcelerated Profits Report instead. This is where you’ll get the names of all my small-cap picks, plus my healthcare and biotech recommendations on a regular basis.

    Hoping your longs go up and your shorts go down.

    Marc Lichtenfeld

    Source: How to Find Great Stocks During a Boom or Doom Period
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