Stocks Had Bad January--So Is It Time to Buy?

Stock-market lore suggests that what happens in January doesn’t stay in January -- it sets the tone for the rest of the year.

Let’s hope they’re wrong.

With Thursday's close, the tech-heavy Nasdaq index fell 10% for the month, its worst decline ever.

A rally on the final trading day of the month helped the Dow pare its loss for the month to just 4.6%, nowhere near its worst January loss ever. The broader S&P 500 index lost 6.1% for the month, also short of a record.

Nonetheless, does the down January mean all of 2008 will be bad or is the worst over?

Many market pros think stocks may be in for a rough ride for several more months but there still are buying opportunities you can take advantage of now.

A lot of the buying buzz is centered on the battered financial sector.

Adriana Posada, a portfolio manager at American Beacon, likes Bank of America . It’s taken a hit from the subprime crisis, but “it has weathered storms similar to these in the past,” she said on CNBC.

“Financials represent a good value,” said Randy Carver, president of Carver Financial Services. Carver’s pick in the sector is Citigroup. “I think it’s been oversold,” he said.

James Parker, an airline analyst at Raymond James, likes Southwest Airlines .

“I believe in uncertain economic times like we have now that good companies go on sale,” he told CNBC, noting that the stock is off 30% from its high last year.

CNBC's Jim Cramer, who called the Federal Reserve's latest rate cut on Wednesday  "incredibly positive," believes that "we are basically out of the woods."

"The markets should be up a substantial amount from here," he said.

"Financials should be bought," including Citigroup, Cramer added. Retail and General Motors' preferred stock is a buy, too.

And so is the agriculture sector.

Cramer gave the thumbs up to Bunge , Archer Daniels Midland and the fertilizer companies.

"The big sell-off has occurred and the group is ready to re-charge," he said.

Others are more cautious, however.

Brian Gendreau, an investment strategist at ING Investment Management, thinks there’s probably more bad news to come for the economy, which will keep the market flat to lower during the first half of the year. He sees the second quarter as the time to start buying again, ahead of a projected second-half rally.

“The market was split between the recessionary camp and the slow-growth camp,” Gendreau says of January. “It resolved itself in the first three weeks of January … the market went from pricing in a recession to saying, with all the stimulus, if we have a recession, it will be short and shallow.”

“The question is,” Gendreau said, “will the real market please stand up?”

Energy, telecom and tech were among the sectors hardest hit in January to date, down 11%, 12% and 14%, respectively.

Gendreau says these sectors, which derive a large portion of their revenue from globalized trade, will reassert their leadership by year end. Specifically, he cites industrial, tech, material and energy stocks.

Regardless of how cautious they are, most analysts and strategists agree: The market will end in positive territory for the year.

Oh, and just a fun little factoid: Historically, with the exception of 2001, legislation providing fiscal stimulus typically occurs in the last month of or several months after a recession.

And for those of you who like to find patterns in the universe: The last time the Nasdaq had this bad of a January, a man named George Bush lived at 1600 Pennsylvania Avenue and a politician named Clinton was getting ready to make a run for the White House.

© 2009 CNBC.com