The market delivered five straight days of gains last week as easing of fears
in Europe helped investors brush aside concerns about the economy on the home
front. Don't count your winnings too quickly. On Monday, stocks sold off
significantly. A late-day rally cut the losses in the session by more than half.
Once again, worries about default in Europe swayed investor sentiment. When will
the madness end? I'm half-tempted to say buy your stocks then disappear for a
few years. When you return, all of these issues will have sorted out and you
should be solidly ahead of the game. Unfortunately, telling an investor to
disappear sounds all too much like the failed buy and hold mentality we have
seen disappoint all too often during the last decade or more. And professional
investors are flummoxed by the current environment. So what strategy should
investors follow? My suggestion would be to find business models that work not
in the future, but today. There can be little patience for pie-in-the-sky
speculation. You need businesses that will make money now and tomorrow no matter
what happens in the economy. The fight for the consumer dollar in a down economy
is quite simple: Have the lowest price in the market, and you likely will win
the fight. It really is that simple. From an investing standpoint, here are
three companies winning the low-price battle to consider for your portfolio:
Teva Pharmaceutical Anyone listening to the battle in Washington has heard about
the high cost of health care, including drugs. It would be a pretty safe
assumption that a drug company selling medicine at the lowest price would do
well in this economy. In the pharmaceutical space, that means focusing on
companies selling generic drugs. My pick would be Teva Pharmaceutical (NASDAQ:
TEVA ) It is far too expensive and risky to buy a research-and-development drug
company. If you haven't noticed, drug pipelines have been shrinking. While
there is great excitement and potential in the space, there has been a dearth of
blockbuster drugs coming to market. At the same time, older drugs are losing
patent protection. Those expirations build the pipeline of a company like Teva.
The best part is Teva doesn't have to invest in expensive research and
development to sell new product. Investors in Teva don't share the same
enthusiasm, but that is what creates opportunity today. The stock is down 28% so
far this year. Wall Street expects the company to make $5.05 per share in the
current year. In the following year, profits are anticipated to jump 13% to
$5.72 per share. At current prices, Teva trades for only 7.5 times current-year
estimated earnings. That is relatively cheap for this low-cost drug seller. In
addition to that low valuation, the company pays a nice dividend. I would buy
the stock at these levels.
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