Four Investing Tips for 2009

2. Economic Cycle Investing

In the last quarter of 2008 economists (finally) confirmed that we were in a recession. (On some accounts, this recession may have begun in the fourth quarter of 2007.)

While 2008 was a year in which very few stocks were able to escape the carnage, 2009 will likely be a year in which a new economic cycle will begin to emerge. Thus, we should begin to look for early economic cycle sectors and stocks to begin to invest in. According to Tony Crescenzi, who writes for RealMoney Silver, consumer confidence "fell to its lowest level ever dating back to 1967" and goes on to write that consumer "confidence is likely to follow a pattern that dates back about 40 years, whereby consumer confidence levels increase around the time of a presidential election and into the inauguration period and beyond."

So what are those early cycle stocks? In general these are the stocks and sectors that begin to benefit from a lower interest rate environment and slow economic growth. Thus, we want to focus on the financials, (though we have to be very selective, given the current financial crisis), paper, chemical, transportation and low multiple/lower growth technology stocks.

There are two excellent sources to learn how to invest in economic cycles. The first is chapter 5 ("Spotting Stock Moves Before They Happen") in the book Jim Cramer's Real Money. The second is Fidelity's Webpage on "Business Cycle & Stock Performance."

3. Benefit from the Obama White House

We have had a tremendous amount of monetary stimulus through TARP and other Treasury programs. There are indications that those may be beginning to work. Now President-elect Barack Obama has a fiscal stimulus plan on deck to build infrastructure and create jobs.

There will be a redirection of government spending from military projects to that of infrastructure and healthcare. As a result, expect a decline in government-fueled projects at defense contractors, such as Lockheed Martin (LMT Quote), Northrop Grumman (NOV Quote), Raytheon (RTN Quote) and Boeing (BA Quote).