How to Find Stocks for a Recession

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By eHow Contributing Writer

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Investors are as worried about recession as the Federal Reserve is about inflation, and at the first signs of a slowdown, stock pickers and regular investors start thinking about how to protect their portfolio from the incipient slowdown. While a recession doesn't necessarily mean all sectors perform poorly, it is a challenging time to hold stocks. However, if you know how to invest during rough patches, you can survive, if not thrive, during a recession.

Difficulty: Moderately Challenging

Instructions

Step 1

Pick stocks that have huge double- or triple-digit growth. In spite of other drawbacks a company may have, if you invest in stocks with massive growth, a slowdown will not affect the growth of the stock very much. Make sure this growth, however, is not at the expense of other factors.
Step 2

Look for stocks that are undervalued based on the company's assets and cash flows. Find good stocks that are disliked during a recession because of external factors and not because of the viability of the company.
Step 3

Opt for companies that have economic independence and are not vulnerable to the fluctuations of the U.S. economy. Good examples are debt collection agencies and companies that have a good part of their revenues coming from overseas.
Step 4

Select defensive stocks that focus on drugs or food. These goods are necessary even in down times, and people don't stop eating just because there is a recession.
Step 5

Protect yourself with dividend stocks. Companies that offer a high dividend yield will be like shelter in a storm and will give you income even in difficult times.

Comments

iamageniuster said

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on 11/5/2008 Excellent article. I gotta try this.

kellykeller said

on 11/4/2008 Anyone have any advise that speaks blonde. I did not understand a word of what he said but I've been told this is a good time to invest for first timers.