How To Invest In A Recession

A major front-page headline in today's Investor's Business Daily states "524,000 Jobs Lost In Dec., Jobless Rate At 16-Yr High 7.2%."

The sub-headlines were bleak as well.

"Payrolls Fell 2.6 Mil in '08."

"Plunge in hours worked signals Q4 GDP debacle, heavy layoffs in early '09."

Obviously, we may be facing one of the worst recessions we've ever seen.

Lots of folks have simply "given up" on the whole concept of trying to invest in this dire scenario. But that could be a mistake.

If you think about it, there could be LOTS of opportunities to make solid investments in a recession... even as bad as the one we're in right now.

Not convinced?

Well, let's look at what people might decide to do in a down economy...

For one thing, "frugality" will probably become a much more common word (and action) in 2009 than it has in a long time. Almost everybody (except perhaps the super-rich) will be pinching pennies tighter than they ever have before.

But folks still need at least the "basics" of life. Food, clothes, make-up, etc.

That fact should help the "thrift" stores. Of course, Wal Mart comes to mind immediately, and also Family Dollar Stores, 99 Cents Only, Tuesday Morning, Big Lots and Dollar Tree Stores may be worth a look.

Also, when some folks get laid off, they decide to go back to school to enhance or broaden their skill-sets and be ready for the eventual rebound of the economy.

In that area, I would look at the "For-Profit" Education sector. In fact, four out of the top five best-performing stocks last Friday in an IBD database were from that sector. Some stocks to look at there are Apollo Group, Capella Education, ITT Educational Services and DeVry.

OK, let's see... what else? Oh, I know.

Not too many people will be purchasing new cars this year, I would imagine. They'll be keeping their old "clunkers" for as long as possible.

That should help the Automobile Aftermarket companies, otherwise known as Auto Parts and Accessories. Some possible names there are Autozone, O'Reilly Automotive, Advance Auto Parts, Monro Muffler & Brake, and Midas. Also take a look at the used car lot stocks like America's Car-Mart and AutoNation.

Finally, I doubt if lots of folks will be able to afford some of the "finer-dining" restaurants, so good old McDonald's might be a good investment there.

Bottom line, even in a horrid recession, there's no reason to bury your head in the sand and try to wait it out. There are ALWAYS opportunities to make big gains in any market.

For example, I'm about to name a stock that was up 63% today, exploding after weeks of flat-lined trading. It may have much more to go on the upside...