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How to Protect Your Portfolio: Seven Ideas for Investing Now
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CNBC.com Senior Writer
4. Get Defensive
Similarly, portfolio managers are heading to names that traditionally provide security while the market looks for further direction.
In one respect that's a good trend, in that it indicates market behavior is starting to return to normal and is past armageddon-type scenarios.
"We've gone in varying degrees through these periods where the volatility spikes, and I think for the most part we're pretty much over that," says Michael Cohn, chief investment strategist at Atlantis Asset Management in New York. "We can get back to a much more normal environment in general. As a money manager you can breathe a sigh of relief. You don't have to be scared to death constantly."
As part of his strategy Cohn is turning to familiar names like Procter & Gamble [PG
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] and Johnson & Johnson [JNJ
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]. He has 5 percent allocated to a managed commodities fund and also thinks biotech could outperform as the country continues with its health care debate.
5. Gold
Another fairly defensive play, the profile of the gold investor has changed somewhat since the metal has eclipsed $1,000, though the benchmark has served as a bit of a resistance level.
"Gold used to be looked at as a way to hedge inflation. Now it is trading from a perspective of safety" against an economic downturn, Anderson says.
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Gold prices have risen along with the stock market and economic indicators, indicating investors want some downside protection should the rally fade.
Forecasters have been predicting a gold rise to $1,200 an ounce and few expect the run to fade anytime soon. Gold and other commodities benefit when the dollar is weak, a situation unlikely to change anytime soon.
6. Home Builders
If there's an area of the market that seems to be encouraging risk, it's housing.
Home builders are at the top of the class in this group, with strong sentiment lately that the group is poised to go higher. Goldman Sachs recently raised its outlook on the group, and New York broker Oscar Gruss recently opined "it's time to go long the homebuilders," initiating coverage on D.R. Horton [DHI
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] and KB Home [KBH
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] with "buy" ratings on each.
While there have been a slew of factors cited—leveling in prices, low mortgage rates, government intervention—Creatura says it comes down to supply.
"There are a lot of industries where capacity utilization is low but the entire productive base has been reduced," he says. "As demand rebounds there's less capacity available to service that demand."
In addition to builders, the capacity utilization criteria fits the insurance, retail and air freight industries, he says.
7. Technology
There's less universal agreement on the strength of tech, which has helped drive the rally. Consumer electronics was the 11th strongest sector in the third quarter, growing 44 percent, and some think the move higher can continue.
BofA-Merrill Lynch cited the group's strong valuation, consolidation and cash as reasons it could move higher.
On the downside, the group has some of the market's most attractive names and could thus be somewhat oversold.
"There's been window-dressing in portfolios from money managers towards September. They're not going to print their portfolios without showing they own Apple [AAPL
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], Google [GOOG
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], Yahoo [YHOO
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] and the other big movers," Anderson says. "Now that we're past the third quarter money managers are going to want to reduce their exposure."
The sentiment reflects a general uncertainty about the market that will present challenges for investors through the duration of 2009.
"We are very concerned that the market, while priced for a V-shaped recovery, is set up for some significant disappointments," Halliburton says. "We think a V-shaped recovery is very unlikely and the probable scenario is for a continued modest correction."
Data is a real-time snapshot *Data is delayed at least 15 minutes
