What Investors Should Buy--And Sell--In This Turbulent Market

With the markets so volatile, many investors might be tempted to head for the exits. But in these nervous times, there are smart moves you can make to protect your portfolio.

CNBC.com asked the experts what they would buy--and sell--in this type of environment. Here's what they're telling us.

Buy: Consumer Electronics

Marc Pado, chief market strategist at Cantor Fitzgerald, says technology-related industries such as software and consumer electronics should do well as corporate spending usually picks up in the fourth quarter. He also believes retailers could be set for a rebound.

"I think we'll test the lows in the next few days," Pado says. "But the two key areas that do well in the fourth quarter are technology and consumer-sensitive areas like retail, which has been badly beaten because everyone has been worried about the consumer."

Consumer electronics play on both of these themes and should garner investor attention.

"In the fourth quarter you get (corporate) spending and the holiday shopping season and despite the pessimism, it only provides us with a buying opportunity," said Pado. "I think we're coming off such a low point here that these stocks should outperform on a relative basis."

Consumer electronics retailer Best Buy is scheduled to report quarterly earnings on Sept. 18 and recently reiterated fiscal 2008 earnings guidance of $2.95 to $3.15 a share. Analysts surveyed by Thomson Financial currently expect earnings of $3.05 a share.

"The expectations are near their lows and therefore manufacturers of game consoles, flat panel TVs and MP3 players will be good this year," Pado says.

Pado also likes Apple , whose shares have declined more than 16% since hitting an all-time high on July 26 but remain up more than 40% for the year.

The strategist also said makers of video games should also see investor interest but declined to provide specific stocks. Shares of the industry's largest company, Electronic Arts , are up 2.4% year to date, while rival Activision has gained 5.5%.

Buy: Pharmacy Benefit Managers

Robert Doll, global chief investment officer of equities at BlackRock, likes pharmacy benefit managers such as Express Scripts .

"We just think the aging population and so many drugs going generic, the mail-order intent of the company, and its improvement of operating margins, all make this stock somewhat independent of the economy and it has excellent fundamentals."

Express Scripts competes with companies such as CVS Caremark , MedcoHealth Solutions and Healthextras .

Sell: Homebuilders, Mortgage Lenders

With the mortgage industry still in turmoil, "a reality check is coming back in for the homebuilders," says David Kotok, chief investment officer at Cumberland Advisors.

"This long re-pricing of risk is not over, it'll take another year or more for it to run its full course," he says. "Don't touch the homebuilders, it's not over yet; stay away from mortgage finance, that's not the way to go."

Last week, Standard & Poor's Equity Research cut the price target on Beazer Homes to $9 from $10 after the company delayed filing its quarterly earnings report with the U.S. Securities and Exchange Commission so it can conduct an internal probe of asset writedowns.

Buy: Energy, Basic Materials

Energy and basic materials companies with broad oversees exposure should continue to benefit from the rapid growth in China and Asia, says Randy Bateman, chief investment officer at Huntington Funds.

"Right now, the timing is still going to favor some energy names and some of those things that are going to be involved in materials that will help the infrastructure build in China and India and those developing nations," Bateman said.

In addition, the fund manager said some high-yielding regional banking stocks with limited exposure to the collateralized debt obligation (CDO) market may be attractive for investors.

"You can pick up some really fine yields there," he said.

Buy: Japanese Blue Chips

Russell Lundeberg, chief investment officer at Barrett Capital Management, says recent volatility has created investment opportunities and remains overweight on foreign stocks.

"We think there's still very strong growth out there and it doesn't have quite as many structural problems with the economy," Lundeberg said.

"Especially right now, Japan has gotten beaten up quite a bit as people tend to unwind that carry trade," he said. "I think that's making it a very, very attractive investment for long-term investors."

One way for the average investor to play Japanese equities would be invest in the iShares MSCI Japan Index , which counts Toyota Motor , Mitsubishi UFJ Financial and Sony among its top ten weightings.

(EWJ) Loading...       (%)

Peter Kang is a markets reporter for CNBC.com. Send comments to .

© 2009 CNBC.com