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Linda Bolton-Weiser, managing director at Caris & Company, says consumer staples stocks are the way to go. She expects earnings growth in the sector to be relatively strong at "around 10 percent on average."
Analysts at Dresdner Kleinwort upgraded alcoholic beverage company Diageo to "add" from "hold", expressing confidence in the company's strength, and maintained their "buy" recommendation for Carlsberg, despite fears over weakness from Russian consumers.
Dresdner Kleinwort also initiated coverage for three stocks of smaller French companies making champagne, which they say are good long-term plays.
Diageo's confirmation in October of its 7-8 percent organic profit growth "has given us renewed confidence that Diageo's portfolio is holding up despite a weakening macro environment," Dresdner Kleinwort wrote in a market research note.
The danger of too much reliance on a slowing Russian market for Carlsberg is partly offset by the fact that the company retains the market share gains made in the first half of the year, the analysts wrote. They expect a 2 percent growth for the Russian beer market and a 5 percent growth from Carlsberg.
The three "pure play champagne stocks" -- Laurent-Perrier, Boizel Chanoine and Vranken-Pommery Monopole -- should be treated cautiously in the near term but the long term prospects are good, as the vineyards surface remains constant, Dresdner Kleinwort analysts wrote.
Laurent-Perrier, which sells over 14 million bottles per year, has seen its earnings per share grow nearly 22 percent since 2003, while its operating margins rose 9.4 percent over the same period.
Boizel Chanoine, the second-larges champagne company in France, sells wines in the country and abroad. Its earnings per share grew at 56 percent per year between 2005 and 2007, while Vranken-Pommery Monopole, whose shares fell 51 percent since the beginning of the year, is the cheapest pure champagne play, the analysts wrote.
Although the health care industry is not immune to a sluggish economy, the sector presents some attractive opportunities, said Carl McDonald, a senior analyst at Oppenheimer & Co.
“As bad as the market has been, the health insurers are down about 60 percent this year on average,” he said. “Beyond insurance, I think you have seen some companies that either have monopolies on drugs or some players with particular products.”
McDonald is bullish on Humana , Aetna and WellCare .
“The one that I like the most there is Humana; I think that’s going to be a great stock into 2009, mainly because the company has a tremendous amount of cash,” McDonald said.
Investors will have a rough ride until April, says Bill Spiropoulos, CEO of CoreStates Capital Advisors, but he thinks now is the time to put money to work.
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Consumer cyclicals such as retailers are becoming attractive, said Bob Stovall, Wood Asset Management managing director and global strategist.
Some energy stocks also make good buys now, he told CNBC's Erin Burnett.
Right now, John Dorfman, portfolio manager of the Dorfman Value Fund, said he’d rather be buying stocks now, but some of his clients insist on selling.
“I think it’s a good time to be buying some stocks," said Dorfman. "I’m buying some pharmaceuticals, and some metals, and some energy, which have been very beaten up. Those are some of my favorite sectors and also some selected financials and industrials.”
David Dreman, Chairman and Chief Investment Officer at Dreman Value Management, says we’re in one of the worst panics we’ve ever been in but there are major values around.
“There are some major values around,” said Dreman. “If you hold them without any margin, I think you’re going to see double and triples, 2 to 3 years down the road.”
Despite the high level of volatility, MarkTravis, of Intrepid Capital Funds, sees opportunities in this market environment. He advises investors to look for businesses with no financing risk.
His first pick is Oil-Dri , a maker of cat litter products.
“Their business is improving, but their share price is not,” he said. “At $12 or $13 (per share), I think you’ve got a third of the market cap in cash and securities and a 4.5 percent dividend.”
Dean Barber, chief investment officer at the Barber Financial Group, says we have entered a long-term secular bear market, and he’s remaining cautious.
“If we’re going to buy anything right now, it’s going to be consumer staples,” he said. “If people are going to stay in this market, they better have plenty of Dramamine, because the volatility is going to continue.”