"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful" -- Warren Buffett
So, is the economy thriving or not? Investment analysts and economists rarely agree on anything. For every pundit who points to the recent rise in the Dow and stocks like Visa, NIKE and Apple and last week's 20,000 Dow record breaker, there's one who says that those are history and we are headed for a big downside.
Still, stock rise, strong economy or not, it's difficult in our "right now-internet-driven" world to resist the "Make $50,000 in Bolivian Emerald Futures" come-on, but they have as much truth to them as the "Get rich working at home in 6 hours a week" scams. Patience is the watchword and will be until some time late next year.
Still, there are some industries that should do well now and in the next few years. Similarly, there are some that should be avoided like pronghorn plague. Let's look at both.
Investments that can do well:
Sin stocks and Chocolate. Think of them as the ATF-ETF. Tobacco and alcohol thrive around the world. Maybe people in the US don't smoke as much as they used to (But, I'm not convinced of even that), but worldwide tobacco is widespread in use. Check out the smoking stations at Epcot next time you're in Orlando. While most of us will forego buying the new 4D TV, we will stop at the bar to satisfy our psychological need for comfort. It is our version of downscaling. (Mind you, I'm not recommending this activity, just commenting on it.)
Chocolate emits serotonin which enhances mood. In stressful times we tend to look for small expenditures that give us an uptick for little cash. A beer or glass of wine, a candy bar and a smoke are cheap (relatively) pleasures. Think of things that can be bought at convenience stores and gas stations.
Consumer Staples core products and household necessities like soap, diapers, deodorant, cosmetics (some of us need them more than others), cleaners and paper products will never (never) go out of our buying range. The companies that make these products generally have diverse revenue streams and suffer little damage in downturns.
Water. Good drinking water is in short supply. Come up the mountain and drink my well water unfiltered direct from the bib and you'll see what I mean. Water companies get the best spring water from the main aquifers under state-regulated supply. In some places around the world, the aquifer is almost gone. Drinking water is THE global growth industry. Water futures are already traded in Australia. Can the CFTC be far behind?
Big Box Retailers, Convenience Stores and Dollar Stores. So where do we buy the candy bars, soap and bottled water? We get our home staples from budget retailers that buy in bulk and can underprice other retailers. They have scale and are very accessible to the demand. They also feature low-cost knock off versions of brand name products that often work just as well, as long as we aren't impressed by the logo on our jeans. We may not like these stores, but we shop there for our core products.
Big Banks, Big Financial firms, Big Pharma, Big… New Administration, fewer regulations on financial firms and big profit companies. Looser regulations may not only translate into higher profits for the Big Financials, but higher interest rates should be a big helper. As a consumer, though, be careful of products that are cloudy . If you don't understand it, don't buy it. Looser regulations may make fraud easier as well.
Hospitals, Tax Helpers and Gravediggers. For some reason I tend to group these together. No matter what the cost, people get sick, pay taxes and die. These companies have the ability to raise their prices in any economy.
There are plenty of solid stock researchers here on Seeking Alpha that delve into the individual securities in these groupings. Browse them.
Investments to stay away from: (I think the reasons are obvious, but if you need to know, e-mail me.)
High Cost Entertainment
Auto Companies (right now)
High Yield (junk) Corporate Bonds
Uninsured fixed income
Next up: "A lesson in modern economics"
John Lohr can be reached at John@somebodyelsesmoney.com
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: We advise investors and Advisors on investment strategies, marketing, business building, frauds and retirement at somebodyelsesmoney.com, opening Friday in test mode