Over the last few weeks, investors have looked high and low for sectors and industries that would continue to perform well even if the broad market didn't. For instance, food stocks - you have to eat daily! - should hold up in a tepid market. The relative stability of the utility sector is also becoming attractive again.

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As the economy continues to inch towards a double-dip recession, the list of potential "survivor" plays is getting shorter and shorter. In fact, I've only got two left that I feel good about.

Method to the Madness
The M.O. is the same as before - stocks that have proven they can continue to march higher in the face of a bearish headwind, rather than the defensive stocks that are merely supposed to move higher in tough times. As an example, the healthcare sector - perhaps the most recession-proof business in the universe - has barely been mediocre over the last several weeks. Consumer staples stocks haven't been much to write home about either.

Investors should prove their faith in a group's stocks, as evidenced by stocks that are actually consistently outperforming the market. As of the latest look, that's brewers/vintners, and heavy electrical equipment. The data speaks for itself.




Index


MTD Pct Chg


2-Mon Pct Chg


3-Mon Pct Chg


6-Mon Pct Chg


S&P 1500 Heavy Electrical Eqpmnt


5.55%


-4.06%


15.13%


19.17%


S&P 1500 Brewers Index


7.66%


1.50%


7.33%


1.22%


S&P 1500 Distiller & Vintners


4.06%


-2.38%


-0.10%


8.14%


S&P 1500 Index


0.26%


-7.85%


-6.14%


-1.17%



If it were just one or two of the timeframes in question, it might be a dismissible comparison. When we're seeing this kind of persistence from the bulls though, the underpinnings of longevity are generally in place.

The coolest part of all though, is that these leaders (1) make some strategic sense, and (2) largely deserve to lead for a while.

The Heavy Electrical Equipment Index?
Yes, it's a real - albeit obscure - index. That obscurity may well be what keeps its constituents from getting hit hard by a nasty market pullback though. Well, that and the fact that heavy equipment purchases are usually firm commitments that are agreed upon months in advance and rarely the kind of thing that buyers can cancel. Think Eaton Corp. (NYSE:ETN), which makes power management hardware (utility grid-level stuff), and Rockwell Automation (NYSE:ROK), which provides automation control solutions for a variety of industries.

Boring? You bet. "Boring", however, has kept both stocks far ahead of the S&P 500's performance over the last six months. And, after both companies posted four straight earnings beats, these boring stocks may become the only exciting thing the market has to offer over the next four quarters. What these guys sell isn't exactly the kind of things that's optional or price-shoppable for their customers.

Drink Up
It probably should be cyclical, but it isn't. And investors know it.

Beermaker Molson Coors (NYSE:TAP) barely flinched in the heart of the recession, only seeing it annual EPS dip from $2.79 per share in 2007, to $2.77 in 2008. It more than made up for lost time with 2009's earnings of $3.80 per share. The same pretty much goes for Boston Beer Company (NYSE:SAM). Good times? Bad times? Doesn't really matter.

The pick of the litter from the group isn't a brewer at all though - it's a distiller. Constellation Brands (NYSE:STZ) mostly swam through the recession as if it wasn't happening, watching operating earnings fall from $1.67 in 2007 to $1.45 in 2008. By 2009, the company was back on track with an operating EPS of $1.60. (Beer is a complex beverage shaped by supply and demand, production and distribution, with regulation thrown in for that extra kick. For further reading, see Beeronomics: Factors Affecting Your Pint.)

The reason it's the pick of the litter, however, is the lower price/sales ratio of 1.03, and the low forward-looking price/earnings ratio of 8.5, both tops within the distiller group. It doesn't hurt that the stock has pretty much shrugged off the market's recent weakness - there's that "Survivor" theme playing again.

The Bottom Line
Whether you choose one, all, or none of those five names, fewer and fewer industries are holding up. So, we have to be extra careful about the ones we choose to actually commit to. Spirits and electrical equipment remain among the few safe plays right now.

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Tickers in this Article: ROK, ETN, TAP, SAM, STZ

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