Investors are back in panic mode again. While there are indeed short-term concerns about the state of the economy and longer-term concerns about the U.S. consumer, patient investors have the opportunity to benefit from the market's current state of paranoia.
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Even though markets are fearful and stock prices have come down, investors should still be very selective in their equity purchases. Focus on quality names that are operating in fundamentally sound industries. Agriculture is an industry with a favorable outlook over the long-run. There is simply not enough agricultural-producing land to support the ever-growing urbanization of the world. Investors can buy the Market Vectors Agribusiness ETF (NYSE:MOO) and immediately have a diverse basket of businesses involved in agriculture in one way or another. One of the largest positions in the ETF is farm equipment manufacturer Deere (NYSE:DE), one of the most dominant businesses in its particular industry. But you also get exposure to Monsanto (NYSE:MON), the world's leading producer of genetically modified seeds. Overall, MOO is a focused play on the world's growing demand for agricultural products and services.
Play the Aging Population
The U.S. population is aging and that will lead to an increased demand in health care, primarily medicine. But rather than investing in the pharmaceutical companies themselves, a better play may be on the distribution side. The biggest winners here are likely to be CVS Caremark (NYSE:CVS) or Walgreens (NYSE:WAG). Over the next couple of years, numerous blockbuster drugs will be going off patent, which will affect the companies that make those drugs. But CVS and Walgreens will benefit as the generic versions of those drugs helps boost sales. Customers like the convenient locations of CVS and WAG and the smaller store size makes the trip less time consuming than Wal-Mart. CVS and WAG have effectively become duopoly in their industry thanks to continued consolidation. Both securities are reasonably valued at less than 14 times earnings.
The Bottom Line
Investor panic leads to profits for the opportunistic investor. When emotion overcomes rationality, sounds tenets of investing - valuation, patience and independent thinking - all disappear leading to opportunities that otherwise would not exist. (For additional reading, take a look at Profiting From Panic Selling.)
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