Where to Invest 2009: An Update

In the eyes of some savvy pros, stocks looked cheap back at the beginning of this year. But with all the uncertainty about the nation’s economy and banking system, even many professional investors were unwilling to commit to buying into the market. So Where to Invest 2009 was designed to appeal to an individual investor’s tolerance for risk. For the squeamish, we highlighted “Safer Harbors,” 4 stocks whose fortunes didn’t necessarily need a robust economic rebound to perform. For slightly bigger risk takers, we had the “A Little Volatile” group, four stocks with solid balance sheets and business models whose stocks appeared unjustly punished. Finally, for daredevils, we had the “Higher Risk, High Returns,” section, 4 socks in downtrodden sectors whose fortunes could soar, or collapse, in 2009.

The result: a portfolio of 12 stocks that returned 37 percent, handily beating the 31 percent gain by the broader market over the same time frame. Here’s how each stock did, individually. 

SAFER HARBORS

These were indeed safe harbors during the market storm. Utility and health care stocks, for the most part, retained their value early in the year. But when the market started its sharp rally in March, utility and health care stocks were left behind. The one stock here that excelled was Microsoft, which trimmed costs and released a new operating system to generally favorable reviews.

A LITTLE VOLATILE

Our best pick, period, was Apple. The stock soared thanks, in part, to strong iPhone sales and an ability to control costs (the return of CEO Steve Jobs didn’t hurt, either). Phamarcy benefits manager Medco kept singing up new businesses, while Cisco benefited from technology stocks returning to favor. And even though patients cut back on discretionary dental procedures, dental equipment supplier Detnsply still rose, albeit not as much as the market.

HIGHER RISK, HIGH RETURNS

These stocks looked the scariest coming into the year, but for the most part did well. Annaly, which buys up mortgages, paid out billions in dividends and benefited from its ability to borrow at extremely cheap interest rates. As the housing prices slowed their descent, investors plowed back into home improvement retailer Lowe’s. The rebound in oil prices helped deepwater driller Transocean. Only General Electric struggled – the firm cut its dividend and lost its vaunted AAA credit rating, and at one point, was trading at less than $7. It rebounded back above $15, over the summer as the market rallied and it moved to unload its majority stake in broadcaster NBC.

Also See:
* Where to Invest 2010