Rocky Roads Ahead: Proceed with Caution
The concern over worldwide recession will continue to linger for some time. It will take awhile for investors to put Tuesday’s madness behind us. Expect Wall Street to be studying every economic data with a Hubble size telescope. Any sign of weakness could trigger another major sell-off. Make sure you understand the key economic data. If you are unfamiliar with these key economic data and how they relate to the economy, see “key economic data for dummies”. Although stocks may appear cheap, be careful on your choices if you decide to go bargain hunting. Choose wisely. Here are some stocks we would consider buying:
Microsoft (MSFT): Trading at approximately $28 per share (might still fall further), we believed this stock is still a great investment. A few weeks ago, this was a $31 stock. Their fundamentals have not changed. While the sales of Vista are slower than expected, MSFT will eventually make us upgrade one way or another. The release of Vista appears to already be having an impact on their search market share. The latest Nielsen/NetRating indicates MSN is making some traction, improving 8.4 percent to 8.9 percent in January. We believed this increase is due in part to Vista and its built in search (a competitive advantage of being a monopoly). Lastly, If there is any company that can withstand a recession it would be Microsoft.
Pfizer (PFE): Trading at $ 24.93 per share, this company is undervalued. Big Pharmaceutical is currently out of favor as Wall Street prefers growth stocks when the economy is strong. Wait until the economy begin to show more signs of slow down, these large drug companies will again be in favor. If you are looking to add some defensive play to your portfolio, this would be a great stock, especially at this level.
Honda Motors (HMC): The stock is currently trading at $37.00 per share (could a few points) which is a inexpensive when compared to Toyota. If the world does go into a recession, we believed HMC should be able to hold its ground. Their cars are economical and known for high resale value and reliability. Personally, if we were to buy a car when times are bad, Honda would be our choice. We believed at this level, the downside is minimal as it is trading at a discount.
General Electric (GE): This is a safe stock for uncertain times. GE produces everything from light bulbs to jet engines. Trading at $34.91 (could fall a point more), we believed it is relatively safe bet and the downsides are minimal. While this stock will not double anytime soon, GE is a company where you can park your money and still earn enough to beat inflation.
Although the market did not continue its fall, the worse may not yet be over. For this very reason we have chosen to concentrate on stocks we believed will be able to withstand bad times. These are conservative stocks and have proven themselves in prior recessions and will do it again if things turn for the worse. Until the world’s financial market stabilize, we are staying away from growth stocks for now.
Comments
When will this downfall ends. It's not a house of pain. It's the mansion of Pain. There are no sufficient evidences to justify that reaction of the market. It's just a domino affect that all started in the asia market. They need to reverse this trend sooonnn
Posted by: Ron Mexico | March 5, 2007 02:53 PM