10 Stocks to Snag in a Correction

Looking at the charts of some S&P stocks, there's a good chance the damage will be less than 14%. It's possible it will bottom at 1050.

That's because the big consumer stocks with solid and predictable earnings that have led the S&P 500 for much of 2004 are showing relative strength compared with stocks in the Nasdaq and Dow. Some consumer stocks such as Avon Products(AVP Quote) and Hershey(HSY Quote) have even moved up during this market retreat.

All of this leads me to a way to divide my buy list into three sections and to plan how to execute those buys if this correction continues to develop as I've sketched out.

The Buy-List Breakdown

Consumer stocks. I'd like to add these to my portfolio for a quick bounce from the stimulus of springtime tax cuts and tax refunds and for longer-term gains as a result of solid earnings growth. Because of those earnings, these stocks probably won't fall more than 10% to 15% from their recent highs.

I might buy shares of shoemaker Wolverine World Wide(WWW Quote). I like the $22 level on the stock, which is about 10% below the stock's March 9 high and close to support at the 50-day moving average.

I'd take a similar approach to other consumer growth stocks I'd like to add to Jubak's Picks, such as carpet and tile maker Mohawk Industries(MHK Quote). A good price for Mohawk would be about $76.

I put two stocks I already own in Jubak's Picks -- PepsiCo(PEP Quote) and Berkshire Hathaway(BRK.B Quote) -- in this category, too. I'd add to my positions in those shares (or begin new ones) on a 10% pullback from recent highs. That would be about $47.50 for PepsiCo and $2,880 for Berkshire Hathaway.

Basic materials stocks. I'd like to add some of these to my portfolio, because I believe in continuing inflation for industrial commodities, thanks to strong growth in places like China and India. But with these stocks, I'd look for a decline of at least 15% before putting my toe in the water.

I'd divide the names that draw my interest into two groups. In one, I'd put stocks like Inco(N Quote) and Carbo Ceramics(CRR Quote). I sold them in Jubak's Picks when they got too pricey for me, but I'd love to buy them again. A 15% drop from the recent February high would put Inco at $32.90 and Carbo Ceramics at $55.70.

The second group consists of stocks I missed on their way up. In this group I'd put Brazilian iron producer and exporter Companhia Vale do Rio Doce(RIO Quote) and graphite manufacturer GrafTech International(GTI Quote). I'd be looking for Companhia Vale do Rio Doce below $51.85 (it closed March 16 at $51.40) and GrafTech near $12.35.

Technology issues. Little in the technology sector has dropped far enough for a potential gain to offset the considerable potential downside if this correction gets out of hand. To make up for that uncertainty in this group, it would take a 25% drop from recent highs before I'd become interested. Even then, I'd be selective. Two stocks I'm watching are Intel and Analog Devices(ADI Quote). For Intel, the price I'm watching is $25.61; for Analog Devices, it's $38.50.

The 10 to Watch Jubak's potential buys in this market correction
Company	Business	March 16 Close	Sector	Target Buying Price
Wolverine (WWW:NYSE)	Shoes and boots	$22.53	Consumer	$22
Mohawk Industries (MHK:NYSE)	Carpets, ceramic flooring	81.48	Consumer	76
PepsiCo (PEP:NYSE)	Beverages, food	51.20	Consumer	47.50
Berkshire Hathaway B (BRK.B:NYSE)	Insurance, financial, home building	3,058.00	Consumer	2,880
Inco (N:NYSE)	Nickel, metals	33.70	Basic materials	32.90
Carbo Ceramics (CRR:NYSE)	Oil and gas drilling materials	62.40	Basic materials	55.50
Companhia Vale do Rio Doce (RIO:NYSE)	Iron and steel	51.40	Basic materials	51.85
GrafTech International (GTI:NYSE)	Graphite products	13.08	Basic materials	12.35
Intel (INTC:Nasdaq)	Semiconductors	27.16	Technology	26.51
Analog Devices (ADI:NYSE)	Analog and digital signaling processors	46.20	Technology	38.50
Source: MSN Money

Keep in mind that these are all just tentative buy targets based on market conditions on March 16. If this retreat starts looking more serious than a standard 15% correction, I'll revise these targets downward.

Similarly, if the retreat stalls and the market reverses more quickly than I expect, I'll revise the targets in the other direction and try to pick up a bargain or two, even at a less-than-expected discount.

In short, know what you want to buy in this very fluid market, and prepare to take whatever opportunities the market gives you.