In late 2008 and early 2009, the stock market and American economy were
undergoing tremendous upheavals. Bear Stearns and Lehman Brothers had collapsed,
and the financial system was in disarray. Washington bailed out automakers and
pledged nearly $800 billion in stimulus funds. Unemployment went from 5% to over
9% in less than a year. Those were scary times. And for many investors, we are
seemingly on the cusp of another market shock that could be equally severe. Now,
the burden of big debts could bankrupt Greece and break up the entire euro zone.
Now, President Barack Obama has proposed another $400 billion to jump-start
hiring as unemployment remains stuck at 9%. Banks still are battered, consumers
are spooked and the market is taking us for a white-knuckle ride again. How can
investors protect themselves? And what lessons did we learn from the previous
crash? One important fact to acknowledge right out of the gate is that market
timing is tremendously different than market hindsight. Yes, if you went to cash
in May 2008 as the market peaked and sat out until the dust settled, you could
have avoided a tremendous loss. And yes, if you had the expertise and foresight
to spot the bottom in March 2009, you would have enjoyed the 60% run for the
major indices across the next nine months. But be realistic. Hanging your
retirement funds on two calls like that is a dangerous business. Rather than
deciding when to stomp on the gas or slam on the brakes, I believe long-term
investors are better served by remaining invested and simply getting defensive
in times of turmoil. By focusing on stocks that weather the downturn better than
the rest of the market, you can limit your losses and still share in the
recovery when things stabilize. Think that's impossible? Well here are here
are five blue chips that both weathered the financial crisis much better than
their peers and managed to rally strongly off the market lows. It's realistic
to think that in the even of another crash, they would hang tough yet again. IBM
5/1/08 to 5/1/09 return: -19% vs. -36% for the Dow 5/1/08 to present: +36% vs.
-12% for the Dow While "Web 2.0" companies are garnering much of the
attention and tech laggards like Cisco (NASDAQ: CSCO ) and Microsoft (NASDAQ:
MSFT ) are the butt of many jokes, one of the oldest tech stocks is one of the
sector's best performers during the past few years. IBM (NYSE: IBM ) is up
handily since May 2008, even though the market remains in rough shape. Big Blue
still is picking up steam, too, with blowout Q2 earnings in July that boasted
big EPS and revenue gains along with strength in all four divisions technology
services, business services, software and systems. It's a high-tech world, and
IBM continues to be a mainstay for many businesses even as the economy remains
largely sluggish. Visa 5/1/08 to 5/1/09 return: -12% vs. -36% for the Dow 5/1/08
to present: +27% vs. -12% for the Dow Lest you think Visa (NYSE: V ) is a
financial stock stuck in the mire with the big banks, investors should remember
that this credit and debit card brand is a processor of payments not a lender.
It makes its money by moving other people's money around. And as online bill
paying and mobile payments surge in the developed world and emerging markets
turn to plastic instead of cash to pay for goods and services, Visa is seeing
extraordinary growth. Total electronic payments have risen more than 30% in the
past two years. That growth helped Visa hang tough amid the market mayhem of
2008-09. And since the news that regulators wouldn't strangle Visa's revenue
stream with a draconian cap on debit card fees, the stock has been surging in
2011 up almost 25% year-to-date.
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