Companies that make prescription drugs, diapers
and soap weren't darlings on Wall Street as the stock markets
soared in recent years.
But the Dow Jones industrial average's brief drop into bear
market territory Thursday is prompting fears of a recession that
could make those producers of basic goods more attractive to
While consumers hold off buying expensive new products in tough
economic times, there are certain things they can't do without.
"You don't necessarily need a new car every year, but if you
have a baby, you buy the diapers every day," said Steve Hanke, an
economics professor at Temple University in Philadelphia.
Investors typically seek save havens in bonds and money market
funds when the stock markets dive.
But it's difficult to determine when to get out of those more
stable investments and put the money back into the stock market,
said Charles Trzcinka, a finance professor at the University of
That's why some market players like to put their money into
companies they know will produce profits whether the economy is
good or bad.
"They're not the high flyers, but they're certainly stable and
they're going to be with us," Trzcinka said. "Just because the
stock market is down, it doesn't mean you don't need houses to live
in and food to eat and clothing to wear."
Investing in individual companies is risky, and there are always
exceptions. For example, stock in Procter & Gamble Co. dropped
$2.35 to $60.85 Thursday after the maker of brands like Crest, Tide
and Pampers announced it will cut 9,600 jobs worldwide to improve
"That shows they won't always perform great, but they will
probably hold up better than anything else," said Richard Nash,
chief market strategist at Key Asset Management in Cleveland.
Real estate investment trusts, or REITS, may also become more
popular if the market stays in a slump, said Chuck Lieberman, chief
economist and strategist at Advisors Financial Center in Suffern,
The trusts, which own real estate, are designed to generate
regular income through dividends.
"When the economy goes into a recession, it's hard to hide,"
Lieberman said. "But people will still need to rent apartments."
Lieberman and others say most people shouldn't look for a quick
way to make money in a bear market. Eventually, many stocks that
have been punished will regain value.
"This bear market is really fundamentally not different than
other bear markets, because the most overpriced stocks are being
brought back to prices they should have been selling at before,"
said Eric Tyson, a financial planner and author of "Mutual Funds
For Dummies" and "Investing For Dummies."
Tyson said small company value stocks have been among the best
performers over the last year, and should continue to do well.
It's still not to late for investors to sell stocks that have
been punished, he added, but that people should also start thinking
"If you have too much in growth oriented stocks, is it too late
to make a change? No. But if the market keeps dropping at 3 percent
a day its not going to take too long to get to reasonable valuation
levels," Tyson said.
Others could simply stop looking at their investment statements
and wait for a stock market turnaround, said Trzcinka, the
University of Indiana professor.
"There are no surefire rules to make money in a bear market,
but the bears eventually hibernate," he said.