In an environment where the stock market is in a state of disarray, Modi says he would definitely recommend tobacco stocks, particularly Altria. "They would be the primary beneficiary." He adds that how investors look at the various consumer stocks also "all depends on the macro scenario" -- particularly whether the dollar will strengthen or weaken against emerging market currencies, which will help dictate how these stocks do.
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Hennessy Funds' Frank Ingarra, for his part, said that a major pullback in the stock market would create a "great" buying opportunity for the top consumer stocks. Ingarra notes that investors could also diversify into Verizon (VZ) and other Dow stocks. In the event of a stock market crash, he says he can't imagine the big consumer stock names not going down. Still, "those stocks tend to be more defensive," he adds. "I imagine they would hold up better."
Ingarra adds that one of his chief concerns is that another market crash could further deter average investors, who have already been scared off by the recent ones. "A lot of average investors are not in the market," he said. A crash would "definitely hurt the psyche of the average investor."
On the other hand, Ingarra said that there is also much fear about deflation, and that it is an "uglier word that's harder to contain than inflation.""If you look at mutual fund flows, they are still heavily into bonds," Ingarra says, adding that he hasn't seen any major turnaround into equities "with the markets playing ping pong between support and resistance levels. Basically ... we need clarity from Washington to help propel us forward." Ingarra says that businesses and investors need more clarity on financial reform, health care reform, energy reform and possible tax increases -- and how they affect the bottom line and available credit. Ingarra said that due to the lack of clarity on these fronts, companies who are sitting on record amounts of cash aren't deploying it. As for the Hindenburg Omen? Ingarra deems it "just one of those technical indicators that may or may not work." -- Written by Andrea Tse in New York.
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