Panic-Resilient Stocks

There are several groups of stocks that tend to act well in a post panic environment, especially if the crash itself drives prices to incredible levels.  Of course, the more unusual the values created, the quicker is the upside correction.  Some of the groups most likely to snap back are:

1. Recession-resistant industries (foods, drugs, utilities).
2. Noncyclical blue chips driven well down (oils).
3. Big names with corporate staying power (AT&T, Exxon, General Electric and General Motors).
4. Fortune 100 and similar companies with good yields.
5. Trade-down concepts like low-cost restaurants and discount retailers (recession "beneficiaries").
6. Companies with low P/Es or low price/cash flow ratios not in the first list here.
7. Companies selling below book value and with positive earnings estimates for the coming year (implying credibly sustainable book values).
8. Companies with low debt/equity ratios.
9. Unleveraged closed-end, non-junk bond funds.
10. Panic-trigger beneficiaries (e.g., oil-service and insulation stocks after OPEC raised oil prices in 1973).

All of these stocks are recession-resistant or perceived as among the most likely to survive hard times.  They retain market sponsorship and regain enthusiastic buyers soonest.  Related positively to the trigger event, they have high visibility because investors remember the concept vividly.

It is important to make hold/sell calls in the light of prevailing market expectation and not personal judgement of what may happen.  If the (correct) bet is no recession, the reward is smaller and slower than if the (correct) bet is market expectation of a recession (whether it comes or not).  The investor must subject his ego to the realities of the emotional climate.  It is better to be rich than to be vindicated slowly.

Stocks that don't fare well in a post-crash environment