This from Smart Profits Report

A Healthcare Haven

It stands to reason that the sectors and companies that traditionally fare better during economic recessions are those that garner essential repeat business.

As my colleague Marc Lichtenfeld has pointed out many times here before, that includes the healthcare and biotech sectors. And far from procrastinating, Marc just issued his “Five Predictions For The Healthcare Sector In 2009″ for Xcelerated Profits Report subscribers in the January issue. If you’re not a subscriber, you should be! You can get more information on that here.

No matter what happens with the broader economy, people will still get sick and will still need drugs and medicines. With a growing population and people living longer, the long-term prospects for healthcare remain excellent.

But in a poor economic and investing climate, your best bet is to stick with the powerhouse pharmaceutical companies like Johnson & Johnson (NYSE:JNJ) and Proctor & Gamble (NYSE:PG), which are masters of the “razor-and-blade model” (basically, once a consumer buys a razor from the company, he/she needs to keep buying blades for it, thus generating repeat business). In the biotech world, look at big boys like Genentech (NYSE:DNA) and Gilead Sciences (Nasdaq:GILD).

Food, Glorious Food (And A Bunch Of Other Stuff, Too)

If people regularly require medicines and drugs, they need everyday essentials like food and drink even more. And while the retail sector is struggling overall, there are some companies that should fare well as the economy stumbles and consumers cut back.

You got it… discount retailers. Okay, so I know pretty much all retailers are slashing prices these days in a desperate bid to get folks to spend their hard-earned dough. But the ones who already boast a discount model as their bread-and-butter are better prepared. That includes sector bellwether Wal-Mart (NYSE:WMT), plus bulk goods stores like Costco (Nasdaq:COST) and BJ’s Wholesale Club (NYSE:BJ), which also offer a huge range of items at bargain-basement prices.

Switch On And Profit

Another favorite safe haven sector during economic downturns is utilities. Again, the companies within it produce goods that consumers can’t live without: Energy and power such as electricity.

The Dow Jones Utility Average (^DJU) includes major power producers like American Electric Power Company (NYSE:AEP), Exelon Corporation (NYSE:EXC), Consolidated Edison (NYSE:ED), and Southern Company (NYSE:SO), which generate reliable, repeat revenues and also pay hefty dividends.

And speaking of dividends, you could head to tiny Luxembourg this New Year and pick up a beefy one with steelmaker Arcelor-Mittal (NYSE:MT). A Business Week article cites the company as a potential turnaround performer next year, stating:
“Most analysts think it’s unlikely that Old World bourses will rally before the second half of 2009. Still, investors with more appetite for risk – and a willingness to pore over balance sheets – can find some good values even in cyclical businesses such as manufacturing. Bleak earnings outlooks have already been factored into many share prices.”

And having endured a brutal 2008, slumping from $78 to $24 a share, Arcelor-Mittal has announced widespread cost-cutting measures that includes shedding 9,000 jobs in a bid to save $1 billion. Its forward Price-to-Earnings ratio is just 2 and with Obama’s infrastructure revolution set to get underway in 2009, the global steel giant could be well poised to profit from it.

The “No-Hype” ‘09

As 2008 thankfully disappears, it will be more important than ever to stick to the tried-and-tested investing principles in 2009.

Right off the bat, that includes being very watchful for hype. In a down market, some companies will undoubtedly be keen to gloss over or downplay any bad news, for fear of causing harm to their stock prices in an already weak market.

Make sure the companies you invest in boast strong, honest management teams, with minimal spin and no excuses. It sounds simple, but look for companies with competitive advantages and which continue to grow revenues and earnings and even pay dividends as a key sign that they’re probably still in good shape.

Remember that with recession hanging over the economy – one projected to be the worst and longest since 1982 – upward momentum could be tough to achieve. Investors are still very skeptical and, among other things, are likely waiting for GDP growth to improve (or at least not be revised lower)… for corporate earnings to beef up… for job losses to ease… for Obama’s tax cuts… and to see what kind of effect Obama’s huge economic stimulus package proposal has. It will arguably take something around $750 billion to provoke much sustained, positive reaction.

So be very wary about bold statements, proclaiming that we’ve seen a bottom in the stock market. We probably haven’t yet. Meantime, consider some of the companies mentioned above and/or those that pay dividends.

Source: Three “Safe Haven” Sectors For Your 2009 Portfolio

This from Investor’s Daily Edge:

So, for what it’s worth, here are my predictions for 2009, please adjust the time frame as necessary.

The bailouts will work. The banking/credit crisis will ease in early 2009, and with it businesses should be able to start borrowing again.  Once the money flows open up we should see some relief from the recession.

Ford (NYSE:F) will survive, I’m not sure about General Motors (NYSE:GM). Chrysler has been dead for a long time. The future of autos is electric and hybrids, not minivans or trucks. This should not be news to anyone except GM and Chrysler.

The market will rebound to the range of about 10,000 to 11,000. Any significant move above these levels will be a function of how well the next administration handles their responsibilities in the early months of 2009. There are very real concerns.

We have elected the most inexperienced candidate, ever. This, during a time when what we need is wisdom, real down home, paid your dues, learned the hard way wisdom. What we have is a person with zero experience that many feel is a leader who can offer change. This may work.

It will work only if he makes all the right moves between January and June. If he makes any serious stumbles, or what are perceived to be serious stumbles, he will lose what is already a skeptical, beaten up American people, and that could be disastrous.

All he really has to do is to be able to explain what he is doing and why, and make us believe it’s good. Not perfect, but at least good.

The confidence of the American people is so badly damaged that we can’t survive another first six months of a new presidency like the last candidate that promised to change Washington, Jimmy Carter. Can’t remember what it was like? Read the editorials in the NY Times for the period of January 1977 to October 1977. Ouch!!

On the other hand, Obama may be able to pull the same smoke and mirror act he did in the campaign. It’s up to the press to let him continue to get away with it. I think they will. If so we may be in for a surge in confidence and better times. And confidence is what we need to get the show on the road. The press however is very fickle, and Mr. Obama may find himself on the other end of that information juggernaut that gave him the presidency.

Everything the government can do is being done to help us through this mess. The success we see in 2009 will be a function of whether the people of this country can get out the funk we are in, start spending and start looking a little further down the road than tomorrow. Pushing them out of the funk has fallen on the shoulders of the new president. It may be the finest hour of any president since FDR. Let’s hope.

Where to make the most money in ‘09: beaten up, high quality, dividend-paying stocks [like General Electric (NYSE:GE), Bristol Myers Squibb (NYSE:BMY), Verizon (NYSE:VZ), AT&T (NYSE:T), Lorillard (NYSE:LO) and Altria (NYSE:MO) etc.)].

Also, corporate bonds at a discount, look at banking, aluminum and other metals, consumer goods, tobacco, insurance, just stay in the short maturities, three years or less and investment grade only. This is not the time to be in junk bonds.

As promised here are two bond ideas. As I tell everyone in The Bond Trader, no matter how good these look to you, don’t load up on them. You should have 10 to 20 bonds in your portfolio not one or two with high coupons.

The first is a pure income play. It is about a ten-month maturity with a yield of 7.35. It is perfect if you want to get a good return on money you don’t know what to do with right now. It’s a Goldman Sachs bond of 10/1/2009, cusip 38141GAD6.

The second is what I call a total return bond, at a discount and a good coupon. The total return is about 22.2%. It is an Alcoa bond of 1/15/12. The coupon is 6 percent and you should be able to buy it around 94. The cusip is 013817AF8.

A return of 7.35 percent for the income folks and 22.2 percent for the total return folks, Merry Christmas.

Source: A Few Freebies To Get 2009 Off To A Good Start

More from Smart Profits Report:

Amid the market’s mess, many pundits have touted the benefits of dividend paying stocks.

While it’s true that dividends bring you a form of income, does it really put a floor under a stock? The argument is pretty simple. Many companies have products that are such an integral part of day-to-day life that they are…

1. Very unlikely to disappear.
2. They’ve built up balance sheets that are strong enough to survive a multi-year downturn.

So instead of high share price appreciation, they repay their shareholders by passing along the profits in the form of dividends.

However, as cash flows dry up, companies cannot always support their dividends and investors can suffer a second whammy as the dividend gets cut and the stock finds a new level at the same yield.

Here’s the way to do it…

Follow The Cash

You have to be tactical. Buying dividend stocks in this type of prolonged downturn does provide a good return if the stock remains stable. But if a cash flow shock occurs, dividends could suffer and the stocks that were supported at the beginning of the bear market substantially underperform later on.

You can avoid this trap by looking at the key driver of dividends – cash flow.

In the heat of a bear market, investors will always be concerned about how far top-line growth can drop, but good management teams can handle this by cutting expenses.

However, the fixed depreciation of hard assets that are stuck to the balance sheet can make profit look worse than cash flow. While profit may look bad in the short-term, I have never seen a company cut a dividend that was 50% of free cash flow (or less).

The bottom line is that as long as free cash flow holds up, the management team has options and the dividend will be safe.

The last thing a company with a historically stable dividend will do is cut its dividend, as it would entirely change the shareholder base by boxing out value investors that have a yield hurdle.

So when it comes to dividend-paying stocks, while revenue and earnings growth are obviously important, be more concerned with the money on the cash flow statement.

Source: Beware The Dividend Trap… Here’s The Most Important Number You Should Consider