Top 9 Questions for 2009

December 24, 2008

Q: Are you bullish on Chinese stocks for 2009 or should we stay with U.S. stocks? Emy A.

A: Good question Emy. I’ll try to be as simple as I can in my answer, though the situation with China is a very complicated one right now.

The saying goes that once America sneezes, the rest of the world gets a cold. I expect this will be true in China, since that nation’s economy relies heavily on the purchasing power of American consumers. We’ve already seen the beginning of the troubles for China in November when Chinese exports witnessed their worst collapse since 1999. Most economists predict the downward trend will continue due to global economic slowdown.

Unfortunately, politics will make it tricky to tell the extent of the damage since China is less than transparent in matters of government and commerce. China likes to think that it is “decoupled” from the worst of the economic problems America is currently facing, and I’m sure the state-run media will do everything they can to spread propaganda with that message. China has a chance of actually seeing a GDP contraction in 2009—shocking, considering last year the nation’s economy was regularly growing at more than 10% a quarter! But you can bet those numbers will never see the light of day if they prove to be true.

Still, I expect that despite all this that China will have some great opportunities for growth in the new year. Institutional investors like to round out their portfolio with international stocks, and some fundamentally strong companies in China are sure to see a bounce. Since the Fed’s drastic rate cuts are sure to result in a weakening of the dollar, we may also see a strong “currency tailwind” emerge and benefit a handful of China’s best stocks.

So in a nutshell, China in general faces a tough road in 2009 like the rest of the world. But there should still be some Chinese stocks that become winners—you will just have to pick your stocks on a case-by-case basis. As of right now, my favorite three Chinese stocks in my Global Growth service all have a hand in the nation’s booming Internet industry. Those companies are Netease.com (NTES), Sohu.com (SOHU) and Asiainfo Holdings (ASIA).

Q: What are the best and worst stocks on the market right now? Annie T.

A: Well Annie, there are sure some duds out there—especially in financials! But the biggest flop that you likely haven’t heard a lot about is probably Nokia (NOK). This company is losing market share by the day, has seen shrinking revenue and rather lackluster profits. Stay away from this dog with fleas if you know what’s good for you!

As for my favorite stock right now, that all depends on the kind of investor you are. If you’re the conservative type and want to avoid the volatility we saw several months ago, you’d be hard-pressed to do better than Walmart (WMT). The company continues to perform well even in this economic downturn—and it is actually growing its same store sales right now! Besides, the company also offers a 95 cent dividend that is a nice addition to the gains it will likely see in 2009.

Q: Do I have to have a lot of money to succeed in the market? I’m afraid to put in more than a few thousand dollars.  RSB.

A: Whether your portfolio is worth $5,000 or $5 million, you can still succeed on Wall Street. It’s my personal goal to make sure that everyone has access to the information they need to strike it rich in the stock market. That includes investors like you with only a few thousand dollars.

One word of caution, though. Some investors make the decision of opting to buy a larger stake in a single stock than spreading their money around. Whatever you do, don’t put all your eggs in one basket! I have no problem with investors who purchase odd lots or small lots in order to stay diversified. You may not see the big punch you’d get from investing in a single stock—but you also won’t run the risk of losing your shirt just because the company has a bad day.

Q: Why are you always harping on fundamentals? What’s the big deal, and what do they mean? Jack

A: You must be new to my website, Jack, because fundamentals are EVERYTHING in the stock market. Basically, they are the cold, hard facts that prove whether a company is growing its sales and profits or whether it is losing ground. Think of them as vital signs for a stock.

Read about the eight fundamental variables I place so much importance on here for more detail. You’ll see what all the fuss is about!

Q: What sectors will lead the market in 2009? Shawn K.

A: The recession is pretty widespread, and it looks like all sectors have taken a hit. That said, I think healthcare stocks and agriculture stocks will continue to succeed. People still need to eat, and they still need to take their medicines. Another big winner late in 2009 should be the construction industry if President Obama’s infrastructure plan gets off the ground (and if the housing and real estate markets stabilize). A safe bet in the shortterm would be domestic railroads, since America is to corn and coal what Saudi Arabia is to oil. Emerging markets rely heavily on our exports of food and energy, and railroads have to ship thousands of tons of those goods every year.

Q:What did you ask Santa for this year? Joan

A: As many golf balls as he can fit in his sleigh. I plan on playing a few rounds during my brief break over the holidays, and I have a feeling a bunch of my current balls are destined to wind up at the bottom of a lake.

There you have it: The Top 9 questions for 2009!

Before I sign off, I just wanted to take a moment to wish everyone Happy Holidays! Stay safe, stay warm and be happy.

Since next Thursday is New Year's Day, I'll have the next issue of What's Working on Wall Street Now on Wednesday, December 31.

Until then, take care!

Sincerely,

Louis Navellier