Two things are certain about 2009:
the economic downturn will hold its grip on business for at least a good part of the year; and
a new administration will take the helm in Washington intent on ending the slump.
With few reasons to buy stock mutual funds at present, investors should keep in mind that market reversals frequently occur when least expected. In addition, securities markets frequently anticipate turns in the economy by half a year or more, with some lucrative investment gains usually occurring before the overall business picture starts to brighten.
So for farsighted investors with above-average tolerances for risk, TheStreet.com Ratings parsed its database for stock funds worth a look in 2009. The nine funds on the pair of accompanying tables represent traditional defensive equity investments for uncertain economic times and some possible beneficiaries from the efforts of Barack Obama and
Chief Ben Bernanke to get the economy back into gear.
All of the stock funds in the two tables at the end of this column have overall grades in the "A" or "B" ranges from TheStreet.com Ratings, which earn them "buy" recommendations.
An above-average yield traditionally provided insulation from excessive price erosion. But in these days of near-zero returns on many fixed-income instruments, the monthly payments that provide a 6.5% yield for
First American Equity Income
should prove particularly appealing.
FFEIX, which appears in the "Traditional Defensive Fund" table, generates its monthly payouts by focusing it holdings on blue-chip stocks such as
Johnson & Johnson
With the stock market stubbornly retesting its lows every time investors start to think that the damage is behind us, a fund with little or no net exposure to stocks is worth consideration. The
James Advantage Market Neutral Fund
actually appreciated 2.61% during the three-month losing streak through November, when most everything related to the stock market suffered losses well into the double digits.
Another classic defensive stratagem is to invest in companies that produce or sell necessities that consumers are least likely to cut back on, even during hard times. With major holdings such as
Procter & Gamble
British American Tobacco
and Wal-Mart -- the
Fidelity Select Consumer Staples Portfolio
FDFAX stands with JAMNX as the only funds in the two accompanying tables with overall marks from TheStreet.com Ratings in the "A" range.
In addition to tangibles that consumers are least likely to forego, illuminating and heating their homes is at the tail end of things they will give up in a recession. So
FBR Gas Utility Index Fund
is a defensive fund worthy of consideration.
The pain of heating oil prices when crude oil spiked above $140 a barrel is likely to drive business to gas utilities, enhancing the returns of RAGHX.
As for the table of possible fund plays for the Obama-Bernanke recession-recovery efforts, the president-elect's plans for expanded health care should benefit the
Allianz RCM Wellness Fund
The fund's major holdings include Abbott Labs,
Medco Health Solutions
In addition to the new U.S. administration, governments across the globe plan to boost infrastructure spending as a means to reverse the economic decline. As a holder of stocks that own, service or manage infrastructure, the
Virtus Global Infrastructure Fund
is likely to benefit.
As the owner or infrastructure-intense utility stocks, PGUAX also qualifies as defensive vehicle because of the recession resistance of that sector. Central bank slashings of interest rates should also result in lower costs for the capital-intensive utility stocks held by PGUAX.
President-elect Obama also campaigned on a promise to allocate enormous expenditures on an environmental initiative, including alternative energy. With holdings in alt-energy stocks such as
JA Solar Holdings
Suntech Power Holdings
Vestas Wind Systems
of Germany, the
Fidelity Select Environmental Fund
stands to benefit.
FSLEX's largest portfolio holding,
, describes itself as being in the "waste-to-energy" business.
Those with longer-term investment perspectives might speculate that the Obama stimulus will reignite industry and thereby stimulate demand for fuels, chemicals, metals and other resources.
A beneficiary of that scenario would likely include the
ING Global Natural Resources Fund
The fund's portfolio includes investments in coal, forest products, mining and iron and steel. Its largest holdings are in oil and gas, with large positions in Exxon Mobil,
LEXMX's natural resource holdings would also insulate holders from the erosive impact of inflation, a possible side-effect of overly ambitious fiscal and monetary stimulation
The Fed's latest policy statement of tolerance of near-zero short-term rates resulted in almost instant weakening of the U.S. dollar. The ambitious Obama stimulus proposal and environmental and social programs could result in additional loss of confidence in the greenback by foreigners.
A diversified portfolio of foreign investments would hedge against erosion of the U.S. currency, and a fund to consider for that purpose is the
First Eagle Overseas Fund
Its portfolio management team, headed by legendary international investor Jean-Marie Eveillard, has its holdings distributed as follows: Europe at 31.6%; Japan, 30.2%; Asia (excluding Japan), 16.4%; Latin America, 2.4%; Canada, 1.5%; and South Africa, 1.3%. Its largest holding, gold, is to many the ultimate inflation hedge.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.