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By Andrew Leckey
Investors seeking industries they can count on in 2010 will have to think outside the box.
New economic and market trends require a reexamination of previously-avoided groups, such as regional banks, insurers, shipping companies, utilities, consumer staples firms and auto component companies. All could take a turn for the better in the coming year.
"Improved economic activity with no meaningful increase in inflation is the overall theme for 2010," explained David Kovacs, chief investment officer for
Among regional banks whose stock prices and prospects seem right, Kovacs recommends several that aren't exactly household names:
Property and casualty insurer stocks were hammered in 2009 because they owned so much commercial paper issued by banks, but balance sheets are getting better and underwriting will likely pick up in 2010. Among those insurers, he likes stock of The
An improving global economy will mean increased shipping into the U.S. and other regions, Kovacs predicts. Stocks of the tanker industry tanked in 2009, which is one reason why he now likes
"One of the difficult issues to figure out for 2010 is whether the stimulus package has cured or killed the patient," mused Jim Lowell, editor of the independent Fidelity Investor newsletter (www.fidelityinvestor.com) in Needham, Mass. "That could mean added volatility and some unnerving in the overall market during the year."
Some positive themes in biotechnology and medical systems bode well for health care investment and the government is certain to fund new medical research, said Lowell. He'd invest through
In an economic recovery, companies of all sizes will use technology to maintain production levels without adding new people, he expects. That makes tech another industry with potential, and Fidelity Select Technology (FSPTX) is a fund with a good long-term track record. It includes "box makers," chip makers and gaming companies, he said.
"In 2010, start looking at the industries that haven't done as well in the rebound," said Mark Salzinger, editor/publisher of The No-Load Fund Investor newsletter (www.noloadfundinvestor.com) in Brentwood, Tenn. "The change in industry leadership will be from very-early-cycle recovery plays, such as retailers and general consumer discretionary, to the middle-stage, more steady-growth industries,"
He advises keying on the consumer staples, utilities and industrials.
Vanguard Consumer Staples (VDC) would be an excellent play on stocks such as
Utilities stocks, now quite cheap and featuring decent dividend yields, were held back because they were considered purely defensive. A weak industrial sector also decreased power usage. It is now time to take another look at them, through good investment vehicles such as the
Industrial companies have also done poorly, but will benefit from lower corporate interest rates in 2010 whenever they borrow, said Salzinger. Any pick-up in orders should provide a boost. Big industrial companies benefitting from lower interest rates, such as
"Engineering and construction companies are another sector we like as the corporate sector starts investing in its own projects and the government's stimulus package takes effect," said Kovacs. "The auto-related companies have had a good run-up, but there's more upside potential as auto manufacturing likely picks up 30 to 40 percent from 2009 levels."
Among those engineering and construction companies, his choices are
"There's no doubt that Asia--not just China--is going to solidify its rebound," said Lowell. "On the global stage for growth investors there is opportunity."
Looking overseas, Lowell likes investments in China such as
Opinions about the industries and investments that the experts would avoid altogether in 2010 vary considerably. For example, Salzinger wouldn't take the risk of including the auto industry as a core holding in an individual's portfolio. Lowell believes there's a bubble in gold and a strengthening U.S. dollar in 2010 will stop its momentum.
We'll find out a year from now which risks were worth taking.
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Investing - New Economic, Market Trends Merit New Approach to Once Shunned Investments
© Andrew Leckey
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