Recession: Time to play defense
04-04-08: Everywhere you turn around; it seems everyone is trying to save this economy. Politicians are scrambling to put forth a plan, any plan. The truth of the matter is there is little the government can do. We believed the current environment is just part of the business cycle. We’ve been steadily growing the last 5 years; it’s time things slow down. The latest evidence that recession is upon us; employers fired 80,000 people in March. The real number is probably higher when it is adjusted later this month. The actual number might be over 100,000. This of course leads to a common question everyone is asking these days. In a time where the future looks bleak, where can one find some haven?
There are many approaches one can take. Some will view this opportunity to buy on the weak. Others will simply sit on the sidelines and wait it out. There are no real answers; it all depends on the situation you are in. Both approaches have its advantages and disadvantages. From our perspective, sitting on the sideline would be too boring. However, we are definitely playing defense. In our view, this is not the time to take on high risk as there are just too many uncertainties.
While there are many companies where you can park your money, we suggest looking at General Electrics (GE). GE is not the most exciting companies to invest in, but the company pays out dividend on a regular basis and does well during tough economic times. The company makes everything from light bulbs to media. The diversity of product and services will benefit GE during challenging times.
Another company worthy of consideration is McDonald’s (MCD). McDonald’s stock has been on a tear in the past couple of years. Although the company has had a nice run, we believed there is still room for MCD to grow in places like China and South East Asia. Moreover, the company’s performance in the U.S is also strong and should continue to do well during poor economic times. We also like the fact MCD pays a healthy dividend.
