5 Stocks To Buy On Weakness

Many investors often start thinking about capital preservation when it's too late. Instead, capital preservation should be at the forefront of every investment decision regardless of whether the market is bearish or bullish. To a value investor, there is no one definition of a value investment. Instead, value is always determined by the price paid for the asset.

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Price Signals
Generally, today's prices are not serving up many undervalued opportunities. Markets are still up significantly from the March 2009 lows and many individual companies have seen their share prices rise multi-fold. But despite the overall expensive price tags for many securities, investors are still searching for assets with the promise of generating attractive returns. With interest rates near zero, the temptation to hold everything but cash is stronger than ever. Yet as is evident time and time again, the best time to hold cash is often when it is the worst asset to hold. At least that is perception in the short-term. In the long run, having such cash can prove opportunistic and valuable.

Cash-Like Stocks
With the global economy taking one bad turn after the other, caution should rule the day at current market levels. Fewer and fewer companies, despite their attractive business models, pass the test for investment. I've been waiting patiently to own shares in names like Chipotle (NYSE:CMG) or Whole Foods (Nasdaq:WFMI), but their valuations are priced for near flawless execution. I think both of these businesses have exceptional managements, but Mr. Market has gotten ahead of himself.

Out of the Ashes
Along with cash, investors should be looking at things like Goldman Sachs (NYSE:GS). While the current SEC investigation is serious, Goldman, as is often the case, will likely emerge a more disciplined and better managed firm. The recent decline has brought the shares down near book value and trading at 6 times earnings. Goldman's future will surely have years of lumpy profits, but in the longer run, the company stands a good chance of making more and more profit.

Bet on Beer
Another name for a doomsday scenario is Anheuser Busch Inbev (NYSE:BUD), a global beer and spirits giant. Beer sales are characterized by their relative stability in all economic environments. But the benefit of a name like BUD is the global reach of the company. Over the past several years, the company has made some significant acquisitions to give it a dominant position in the beer business. With names like Budweiser, Becks and a catalog of leading local beer brands, Inbev is a company with an extremely strong franchise. (For more on companies that do well in hard times, check out Industries That Thrive On Recession.)

Speaking of strong franchises, health insurer WellPoint (NYSE:WLP) also will likely do well in good and bad times. Despite the back and forth concerning the future of healthcare, it's likely that insurance companies will play a major role. Specifically, the dominant providers like WellPoint will benefit from having a larger pool of insureds to cover claims. And with a current P/E of 5, its shares are looking incredibly cheap.

Bottom Line
Today's market prices create a lot of concern with respect to future returns. Shares prices have risen past realistic expectations for the economy. Investors would be best to pare future expectations and gladly accept holding cash when opportunity is thin.

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