Investors may be waiting a long time for stocks to rebound, but that doesn't mean they have to sit on their hands.
As the market slides back towards its November lows and investors worry that the stimulus package may not do much to boost the economy, it's hard to find any reason to buy stocks. But even if the overall market continues to worsen, there are always individual stocks and funds that buck the trend.
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"Things don't have to improve, but just stop getting worse," says Gary M. Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. "At the end of the day—outside certain credit spreads—you have seen very little stabilization for the economy, just increasing signs that things are getting worse. That's made it very hard for the market to rally here."
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Like many others grasping for value in this market, Flam is focusing on companies that are stable and will grow in spite of the economy. They include some counter-cyclical companies, such as private-education groups, as well as service providers that will continue to see demand despite the dour conditions.
For some, the plays are in the safety of exchange-traded funds, while others are going to either extreme—taking very short-term positions to capitalize on market bounces or very long-term positions in companies that may look weakened now but will outlast the hard times.
"There's a lot of uncertainty about how bad the current recession will get and what impact that will have on corporate earnings," says Charles Rotblut, senior market analyst for Zack's Investment Research in Chicago. "I understand a recovery will happen. The question of when a recovery will occur is definitely weighing on people's minds."
The uncertainty is being fed by Washington, where reality is setting in that even if Congress does pass a stimulus package, it may not have much impact this year.
That has put a damper on enthusiasm for infrastructure stock plays, which has been based on speculation that President Obama's push for shovel-ready capital projects would boost construction, supply, software and a slew of other affiliated companies.
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"It doesn't look very stimulating," Art Cashin, director of floor operations at UBS, said on CNBC regarding the economic package. "People are talking about more pork than perc in this thing and it's not really going to stimulate."
Pockets of Strength
Along that mindset, investment advisors are looking for areas that will withstand the continuing economic peril.
Agricultural giant Monsanto (NYSE: MON) recently has raised its guidance, making it a favorite for Rotblut, who likes the company because it provides products that help farmers grow more food. That in turn makes it a company that provides a solution to current problems rather than just adding to the misery.
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Other stocks Rotblut likes include Enterprise Products Partners (NYSE: EPD), a pipeline company with strong revenues, and ITT Educational Services (NYSE: ESI) which recently said its enrollment is rising, making it another component in a highly popular industry as displaced workers look to increase their education.
Such plays make sense at a time when Wall Street and the broader public will need to adjust their expectations to the political realities that seem to be confronting the Obama administration.
"We've lost that kind of honeymoon period for Obama where there was a lot of hope and a lot of expectations," says John Massey, senior vice president and portfolio manager at AIG SunAmerica Asset Management. "So far we haven't seen much."
As a result, Massey says he likes defensive stocks and is overweight health care, consumer staples and technology.
Among his selections are Oracle (NASDAQ: ORCL) especially as well as Microsoft (NASDAQ: MSFT), two stocks he thinks will benefit from a perception that the horrible quarterly earnings reports from the big names are signaling that the worst is starting to pass for the sector.
Indeed, the Nasdaq led stocks Monday, softening an early slide as the tech barometer was up even as the other indexes lagged.
On the consumer side, Massey thinks Best Buy (NYSE: BBY) also is a company that will do well as its chief competitor, Circuit City, is liquidating.
"There's a belief that technology has seen the worst and may be able to recover, and the valuations in some areas are attractive," he says.
Elsewhere, there's still hope that the stimulus package will yield at least some results this year.
To capitalize, Rick Pendergraft of Investor's Daily Edge is playing the McAfee (NYSE: MFE) software company on the belief that its products will be useful in mapping out the infrastructure programs yet to come; and the SPDR S&P Homebuilders (NASDAQ: XHB) exchange-traded fund that holds a variety of builders and home improvement companies will benefit from fits and starts in the housing recovery. Pendergraft warns that the XHB may not be a long-term play, but could yield some short-term benefits.
Today's market is similar to what the country experienced during the 1973-74 slowdown, says Pendergraft, who notes that many of the current market data points are at the lowest levels since that slowdown.
As such, the psychology is bound to be the same as well.
"It's kind of a physics principle at this point--you can't start going up until something stems the momentum to the downside," Pendergraft says. "It's going to be something that almost has to shock the system back to health." For more stories from CNBC, go to cnbc.com.