Large-caps for thick and thin

Stocks for Thick and Thin

Excerpt:

... the winning strategies favored stocks with large market capitalizations and so-called value stocks—those with low price-to-book ratios. The clear lesson: Large-cap value is the best category for performance through thick and thin.

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Be warned that while the average large-cap value stock also goes up during bull markets, the sector often is beaten by small-cap growth stocks—especially when the market is surging higher. The classic example is the go-go years of the late 1990s, when Internet stocks thrived and large-cap value produced relatively small gains. But boredom and modest profits might seem a small price to pay for the downside protection that large-cap value stocks often provide. During the 2000-02 bear market, in fact, the dozen all-weather strategies on the Hulbert Financial Digest's monitored list produced an average gain of nearly 2%, even while the stock market as a whole was losing more than 40%.

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So which stocks would be favored today by an investor wanting to increase his equity portfolio's ability to withstand a downturn? To find out, I compiled a list of stocks recommended by the dozen advisers who performed the best during the last two bear markets and who have also done well in the intervening bull-market periods. Four stocks were recommended by at least four of these dozen advisers. 3M, the industrial conglomerate, trades at 16.4 times its earnings over the past year, compared with 17.9 for the S&P 500 index. International Business Machines, the information technology firm, has a price/earnings ratio of 14.1, while medical-technology company Medtronic has a multiple of 13.8 and retailer Wal-Mart Stores trades at 14.3.

Comment: Image source. Daughter works at 3M. I like all three but WMT is the least exciting.