Young and Invested

There you have it ladies and gentleman – THE toughest iPhone case to protect your phone out there. However, when I say toughest, it’s probably not what you had in mind. I meant it in terms of the best case for when YOU’RE in the toughest financial times – something a lot of us might be able to relate to in the last year.

By the way, if you’re wondering whether that’s a real iPhone case, it is. It’s designed by a company called Case-Mate. Here’s the link: http://www.case-mate.com/iPhone-3G-Cases/Case-Mate-iPhone-3G–3GS-recession-case.asp.

After I actually pondered whether it would be worth the money to get a few laughs from walking around with a phone in this case, it then led me to a few interesting thoughts that investors should always keep in mind about investing during a recession.

Difficult economic times make a majority of the population more conscious of prices.  The “majority” of consumers usually pertains to non-niche groups of customers and those people with more constrained budgets (in all likelihood around 95% of the population). However, wise investors will use contractions in the economy, when people lean towards purchases that are more sensible and controlled, to their benefit.

Historically, this would direct investors towards staple investments: food stocks, electricity stocks, gas and energy stocks, and water stocks (and even alcohol/gambling/tobacco companies). These just have a more reliable track record of earnings that’s expected to continue even in a recession.

Let’s look at a few examples. Assuming the recession kicked in around mid-March 2008 (as has been declared by the USA National Bureau of Economic Research to officially be December 2007), the DOW is currently sitting at -20.8% and the S&P 500 at -19.7%, here are few stocks that have fared well in this time  period:

-          Family Dollar Stores (FDO) – one of the biggest dollar stores in the USA is +47.3%

-          Wal-Mart (WMT) – thought this would be up more, but regardless, is up +1.8%

-          British Petroleum (BP) – one of the biggest in its segment by market cap is -14.5%

-          Coca-Cola (CCE) – down -14%

-          Campbell Soup Company (CPB) – quality food at budget prices is +4.5%

-          Kellogg Company (K) – another well known house-brand is down -3.5%

You might notice in the list there are a few exceptions, but the point I want you to take away from this is that there are every-day brands that you see all around you that could be incredible business opportunities. Keep your mind focused on finding these little gems right away, and if you do it vigilantly, you could find it a long time before Wall Street finds them (Wall Street always notices these after consumers have already spread word of mouth). Obviously, not all staples and budget-type companies will succeed in recessions, but are much more likely to.

In the meanwhile, I’m going to go buy myself a new cardboard iPhone case.

Disclosure: this author does not own any of the aforementioned positions

Last 3 posts by Daniel Eskin

• Expert Interview - Puru Saxena - March 9th, 2010
• Memory of a Crisis - March 8th, 2010
• Blogger Interview - Babak - March 2nd, 2010