Buying Stocks in a Slowing Economy

How you can make money in any market

business. Happily married for 15 years, with three children and a grandson, Bruce is now starting to invest for retirement and the college education of his children. “The reality is though the motives for investing have changed, the methods have not,” he says.

Even if the economy continues to slow, Carolyn Robinson, a 34-year-old Richmond, Virginia, resident, remains unperturbed. Robinson thoroughly researches stocks before investing in them. And because she has a long-term investment horizon, she figures she’ll be able to recover even if the economy continues to cool.

Robinson’s philosophy: “Examine a company’s fundamentals-their core management style, how the company is run-and how consistently they’ve grown sales and profits. With those elements intact, there’s no reason to become alarmed.” If anything, these elements give her greater confidence in her stocks. “If the price should happen to decline, I consider it a welcome opportunity to buy more,” Robinson said.

Robinson has been a stock investor for about seven years. The current value of her portfolio, approximately $150,000, is comprised of mutual fund holdings in the Vanguard Balanced Index Fund (VBINX) and the T. Rowe Price Growth Stock Fund (PRGFX). Her largest individual stock holdings include: Intel Corp. (Nasdaq: INTC), Colgate-Palmolive Co. (NYSE: CL), and Pfizer Inc. (NYSE: PFE).

Robinson suggests remaining disciplined and investing consistently. “This is the best time in many years to be in the market or to get in [the market] if you’re not a
lready there. It’s a great buying opportunity for the long-term investor to buy good-quality stocks, particularly at current [price] levels.”

Peter Johnson, a registered investment advisor in Sunnyvale, California, says, “There are stocks that offer considerably lower risks for investors who want to initially buy stocks or those that want to expand their portfolio in a slowing economy.” Johnson is the founder and chief vision holder of greenjungle.com, an educational Website for investors.

Some of those equities are known as noncyclical stocks because they represent companies with businesses that are less affected by economic cycles. Consumer staples such as food, personal care, and cleaning products are included in that stock category, as well as companies involved with healthcare, entertainment, gas, and energy.

Olivia Barbee, a senior analyst at Morningstar Inc., a Chicago-based provider of financial information, agrees. “Companies that deliver inexpensive or necessary products do well when the economy slows. Cyclical stocks-those that are highly sensitive to economic cycles-are the ones to be cautious of,” says Barbee. “These stocks include automakers, publishers, and paper manufacturers. High-yield bond funds can also be risky in such an environment,” Barbee adds.

“There are two other sectors that might offer excellent picks: energy and technology stocks,” says Chuck Hill, director of research at First Call, a Boston-based research and consulting firm. First Call analyzes the earnings performance of most major U.S. companies in numerous industries.

According to Hill, “Analysts tracking the heating oil and natural gas sectors have been behind the curve on their price estimates. Therefore, their earnings estimates for those companies have been off the mark.” Estimates on the performance of these companies

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