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Which Investments will Pan Out in a Bear Market?
By Alan Clendenning   Associated Press
NEW YORK — 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 investors.

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 Indiana.

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 long-term growth.

"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, N.Y.

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 about buying.

"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.

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