Bear Strategies -

By: Jonathan Swift, 2008-03-21

Bear Strategies



Many people believe that US will inevitably fall into recession levels; that basically means that no matter which stocks you own, they will probably go down, as it has happened over the last 3 months.

Bear Strategies

Many people believe that US will inevitably fall into recession levels; that basically means that no matter which stocks you own, they will probably go down, as it has happened over the last 3 months.

Microsoft, the software giant, has fallen 30%. Google, decreased its value from 747 to 430, almost 50%! In general, the Dow Jones Index, Nasdaq and S&P deceased an average of 30% in only three months.

If you think the worst hasn´t yet arrive, the following are excellent options for making money in bear markets.

1- ETF´s that replicate the inverse of some sectors

• SKF, ultra short financials, seeks for results that are as twice as the inverse of the Dow Jones US Financial Index

• QID, ultrashort against nasdaq 100

• DOG, ultrashort against Dow Jones

• REW, ultrashort against the tech sector

My personal favorites are SKF and REW, since recession generally affects in a deeper way to financials and tech stocks. Nevertheless, they are subject to intense volatility.

2- Depreciation of the Dollar and Commodities
• FXE, reflects the price of the euro. If the dollar depreciates against the euro, this index will gain
• FXF, swiss franc versus dollar
• FXY, yen versus dollar
• DIG, ultra oil and gas, gains value as natural gas and oil increase its value
• GLD, simillar to DIG but with Gold
The first three belong to the world bonds family, as they are known, and are non-diversified.

Recession generally involves that commodities decrease it´s values, so this isn´t the best choice for it. But they function very well because investors tend to place their money in commodities replacing stocks. Besides, if the FED continues to lower the rates, it is very likely for the past world bonds to gain value.

3- Finally, between my favorite bear strategies, but less aggressive than the previous options, buying anti-cyclical stocks is a valid option. These tend to be the beverage, health, pharmaceutical and consumer sector.

• JNJ. Johnson & Johnson is a very solid company, with net cash (more cash than debts), increasing dividends and excellent management.

• KO. Coca Cola, has a very good past performance, with similar characteristics to JNJ. Both of them are some on the options that guru Warren Buffet, actually the richest man on Earth, decided to invest in.

• PHG. Philips, has an incredible PER of just 6,5 and is growing fastly.
There are some more examples, but I stated only three nice anticyclical stocks.
Therefore, investors should know that they can make many no matter if we are in a bear or bull market.

Bear Strategies Quick Stock Analysis