Stock Picks For 2008
With the fate of the stock market and the U.S. economy both hanging in the balance for 2008, portfolio diversification and providing a safe harbor for your investments is even more important in the coming days and weeks. Listed below are a few trends and sectors which are likely to at least remain stable through 2008, if not over performing the market.
Most fund managers, economists and analysts are recommending investors to go international. While the U.S. market languishes with the drag from the credit crunch and subprime tainted financials, emerging markets, commodity exporters in Asia, Africa and South America and petro-dollar based economies are forecasting record growth rates. Newly opened hedge funds and funds of hedge funds in Asia and Russia have posted record intakes and billions in investments since August 2007.
The investment arms of governments in the middle-east and China, known as sovereign wealth funds, such as ADIA, have since invested billions of dollars in troubled U.S. based financials, manufacturing and telecom companies and other sectors. Thus, the economies of these countries and the share prices of public companies based there, a lot of them listed on NYSE and NASDAQ, are poised for major gains. Stock pick recommendations include middle-east and Russia based financials and oil producers, China & South Korea based manufacturing and India based software services providers.
Another area which is likely to do well in 2008 is the local insurance markets and municipal bonds. Warren Buffett’s Berkshire Hathaway recently acquired the reinsurance arm of the ING Group, NRG N.V. He has also launched a new bond insurer for state and city governments, Hathaway Assurance Corp. Weakened by subprime writeoffs, existing bond insurers are no longer capable of the kind of financial muscle required to underwrite city and state bonds. This has given opportunity to cash rich groups like Berkshire Hathaway to enter this market, where demand is plenty. Expect new entrants to this area, and an increase in stock prices for companies able to provide the backing necessary for bond insurance. Also, if by late 2008, the economy weakens further and a recession looms around the corner, treasury bonds and blue-chip investments offer an attractive alternative to the volatile markets.
A third sector which is virtually assured of a bull run through 2008 is commodities other than oil. Agricultural and dairy product exporters in developing nations, Australia and New Zealand look increasingly attractive as they encroach upon the markets traditionally held by U.S. and West European multi-nationals. Another commodity, gold, is generally a dependable safe harbor whose prices start going up at the first mention of a U.S. or global financial crisis.
In summary, fund managers across the nation are already preparing for similar scenarios, and tweaking their investments to maintain a sufficient spread across all these asset classes in order not be hit hard by a recession. Everyone fervently hopes there will no recession, but if there is, it is better to be prepared for it. Maybe you’ll miss out on the next Google, but at least you won’t be washed away.