While most long-term investors should stay on the sidelines during the current market turmoil, analysts say there are opportunities to find some bargains amid the carnage.
"Fear creates opportunity," Michael Embler, chief investment officer at Franklin Templeton Investments, told CNBC.com. "If you are a long-term investor, you should be turning off your screen. But if you want to buy stock, this is an opportunity."
Stocks tumbled this past week, retesting the recent closing low of 13,181 on the Dow reached on August 3rd. The markets have been roiled by increasing anxiety over tightening in the credit markets as hedge funds in the U.S. and Europe were impacted by the subprime mortgage crisis.
"Right now the risk/reward ratio just isn't there for the Mom and Pop investor," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "Nobody wants to call themselves a market timer, but nobody wants to step up and buy a stock today to see their head handed back to them tomorrow."
Analysts say investors would be wise to reassess their portfolios before taking action in this environment.
"The best advice is to ride it out, but if you really can't sleep at night then do something," said Hugh Johnson, chief investment officer at Johnson Illington Advisors. "Reduce your exposure to stocks. Among the stocks that you keep, overweight large safe companies like consumer staples such as a beverage company. Underweight financials and economically sensitive stocks."
"I think this is a good time to do your research," said Steve Goldman, chief market strategist at Weeden & Company. "It's going to take a month or so to sort things out. In a few weeks, approach this with a clear head and don't be excited by all the gyrations. This will all hopefully bear fruit for stocks in the fourth quarter."
Analysts say investors looking to buy stocks need to be especially selective.
"I just really like the solid names," said Pete Najarian of Najarian Capital and a regular on CNBC's "Fast Money." "Look at Coca-Cola hitting a 5-year high. Look at Hewlett-Packard and IBM. The 'Warren Buffet-style' names are still performing, even with all the negativity we're seeing in the marketplace."
Franklin Templeton's Embler likes companies that have been beaten down in the recent volatility, but still exhibit strong underlying fundamentals. One of his favorites is lumber and paper producer Weyerhaeuser . "As a result of their exposure to housing, the stock has come down about 20-25% in the past month or so," said Embler. "It's got premier timber and manufacturing assets. It's got very strong underlying asset value."
If you're looking for a play in the battered financials sector, Embler recommends US Bancorp. "They are very diversified because of their payment processing and asset management businesses. They don't have a lot of subprime exposure."
Embler also likes News Corp. and Time Warner. "These are big diversified media companies," he said. "It's an area the market has loved to hate. Both stocks are off their highs and both have attractive assets."
Franklin Templeton owns all of Embler's recommendations in their funds.
Adam Lass, senior market analyst at Wavestrength Options Weekly, likes stocks that have weathered the recent volatility well. He recommends military-related stocks including aerospace/defense contractors Raytheon and Northrop Grumman and conglomerate United Technologies.
"These stocks have survived this whole episode rather nicely," said Lass. "We have active war fronts going on in Afghanistan and Iraq and saber rattling with Iran. We have some presidential candidates that are talking about leaving Iraq, but no candidate is talking about reducing the military. I think these are good long-term buys."
Lass does not own Raytheon, Northrop Grumman or United Technologies.