Investors, 2007 is now in your rear-view mirror. What matters is what's ahead. And next year may be tricky to navigate.
The U.S. economy is expected to slow down. The stock market is expected to continue its big swings, giving spasms to those who check their 401(k)s daily. And then there's the unknown impact of a presidential election.
To help you, we asked investing gurus to come up with eight great ideas for '08.
Few ideas overlapped. That may indicate we're in for an unusually tumultuous year.
Some see money to be made in preserving our planet and its resources. Others see money to be made in companies whose sin was standing too close to the housing and mortgage markets.
Some of the recommendations are familiar. Others, you might never have thought of.
Amy Domini, founder and chief executive, Domini Social Investments, Boston
Green is green.
Investors this year poured money into stocks of companies in obviously climate-friendly industries such as solar energy.
Then there's Emerson Electric Co.
"This is a real boring company, but a lot of boring, old stodgy things have suddenly become important." she says.
Emerson might be best known historically for making valves, motors and other electrical gear, but it's also into air-conditioning equipment and helping manufacturing plants and oil refineries get more efficient.
As business, consumers and countries start addressing climate change, they will tackle the easiest jobs first, Domini says. Consumers will demand more fuel-efficient cars. Governments will upgrade power grids that lose significant amounts of electricity during transmission. And businesses will retrofit office buildings so they're not too hot in the winter and too cold in the summer.
"These are all bread-and-butter businesses for Emerson," Domini says.
Emerson also has a sizable presence in polluted Asia, a likely market for Emerson's technology, she says.
"I consider this the kind of company you should be able to purchase and sleep on for five years," Domini says.
Peter Ricchiuti, assistant dean, Tulane University business school, New Orleans
Next year's big play: water.
"People have realized that this is the next great natural resource that's going to run into trouble," Ricchiuti says.
Pockets of drought appear in the country and aren't likely to go away. "Atlanta is about to run out of water," Ricchiuti says.
Plus, leaky pipes are a big problem in some of our oldest cities. Hurricane Katrina, for example, exposed the collapsing infrastructure of New Orleans, where Ricchiuti teaches.
"We think 50 percent of water doesn't make it to the faucet. We hear that for New York City, too," Ricchiuti says. "We have pipes under the ground that are made of wood, and those are some of the better ones."
Ricchiuti's best bets for taking advantage of the need for water system fixes: Mueller Water Products and Watts Water Technologies. Mueller does "all the municipal water work in the country, from fire hydrants to the faucet," Ricchiuti says. Watts is a world leader in making valves so you don't scald yourself, he says.
Both stocks took a drubbing this year. "Both have been painted with the housing brush," Ricchiuti says. "That's not really the story. The long-term story is water."
Dan McHugh, president, Lombard Securities, Baltimore
Bank and brokerage stocks across the board have been beaten down by the subprime mortgage mess, McHugh says. Financial stocks are selling for half or even a third the price that they were going for early this year, he says.
The fire sale will continue into 2008, he predicts. "I don't see a bottom at this point."
And that includes some banks and brokerages that never walked into the mortgage minefield. You can find some of their stocks at low prices, McHugh says.
He has his eyes on Seacoast Banking Corp. of Florida; SWS Group, parent of Southwest Securities, and Provident Bankshares Corp., the largest Maryland-based bank. He says he hasn't bought any shares. He's waiting to see if their prices go lower.
"I would stay away from large banks," he says. Chances are smaller banks avoided risky mortgage securities, but there's no guarantee, he says.
"Investors will have to be discriminating and know what's in the portfolio of the banks they buy."
David Joy, chief market strategist, RiverSource Investments, Minneapolis
Sluggish earnings. Rising interest rates. A volatile market. Not a great prognosis for investments.
Joy's solution: Invest for dividends.
"You can get yields that are in fact 5 percent or more," Joy says. That's better than CD rates, especially with interest rates heading down recently.
Joy's best bets for dividends are AT&T; Inc., Bank of America Corp. and R.H. Donnelley Corp.
AT&T; this month announced its largest annual dividend increase. That will push its dividend yield next year to about 4 percent, Joy says.
Bank of America offers a dividend yield of about 5.5 percent, Joy says.
And R.H. Donnelley Corp. - publisher of Yellow Pages - will offer its first dividend next year, Joy says. The yield will be about 6 percent. The company is likely to continue the dividend beyond next year, he says.
Besides fat dividends, all three stocks have potential for sizable gains, Joy says.
Eric McKissack, portfolio manager for Calvert Mid Cap Value Fund, Chicago
You know the Brink's Co. for the armored trucks that banks place their money in for transport. McKissack says it's also a good place for your money.
The stock trades at about $60 a share. That's a lot less than the $80 a share that activist shareholders - pushing to split the company in two - say it's worth, McKissack says.
The stock's drop is tied to the weakened housing market, McKissack says. Brink's provides home security systems, and investors have figured the company would be installing fewer systems because fewer houses are being built. But Brink's makes more money on servicing contracts than on installations. That strong cash flow should carry Brink's through until housing starts pick up, McKissack says.
McKissack's other stock pick comes from the beaten-down financial sector. Markel Corp. is a specialty insurer with a wide range of customers from dance studios, universities and professionals to hunt clubs, hotels and homeless shelters. Markel doesn't have many competitors so it's not under pressure to lower its prices, McKissack says. And its management has a good investing track record.
Markel is called the Baby Berkshire Hathaway partly because it doesn't split its stock, McKissack says. The stock traded as high as $555 a share this year, but now trades about $475.
Jerry A. Miccolis, senior financial adviser, Brinton Eaton Wealth Advisors, Morristown, N.J.
Timber, to Miccolis, is not synonymous with falling. Quite the opposite.
Miccolis argues that timber is the best addition to your portfolio for '08.
He likes timber because it doesn't behave like other investments. If the stock market goes crazy, oblivious timber does its own thing. If bond prices plummet on a rumor, timber goes along its own merry way. So when everything else in your portfolio is going haywire, timber is unaffected.
Timber's potential return over the long-haul is better than stocks, too, Miccolis says. Big company stocks return about 11 percent a year over decades; timber is 15 percent or more, he says.
Wood has a longer shelf life than other crops, too. "If there is no good market for timber this quarter or this year, you don't cut down the trees," he says. "They grow." And you can sell it next year for more money because the trees are bigger.
Wildfires are a major risk, of course. That risk can be reduced by owning timberland in different regions of the country, Miccolis says.
The good news is you don't have to buy acres of land to invest in timber or play lumber futures. You can buy shares in a real estate investment trust or in some of the newer exchange-traded funds, he says.
Richard Cripps, senior managing director, Stifel, Nicolaus & Co., Baltimore
Apparel stocks are oh-so-out of-fashion right now. But Cripps says all apparel retailers aren't alike. He's high on apparel for '08 - men's apparel, that is. And specifically Men's Wearhouse.
"Men's fashions never go out of fashion," says Cripps.
Men's Wearhouse sells suits for under $1,000. It can clothe a college grad on his first job and take him all through middle management, and possibly beyond. Men's Wearhouse also has a growing tuxedo rental business, Cripps says.
The stock fell 28 percent this year, making it a good buy, Cripps says. He blames the drop on investors lumping all apparel stocks together. But women's apparel is much different from men's, Cripps say.
"Women are more fashion-driven and very, very sensitive about who has the good merchandise," Cripps says. Women also are the first to cut back on purchases as soon as the economy weakens, he says.
Douglas G. Ober, chairman and chief executive, Adams Express Co. and Petroleum & Resources Corp. Baltimore
Consumer staples do well in weak economies because their products continue to be used. "You might use less shampoo, but you're still going to wash your hair," Ober says.
So Ober is looking to international consumer staples for 2008. Consumers might tighten their belts here, but not those overseas. Plus U.S. companies can get an earnings boost when foreign sales are converted into U.S. dollars.
Ober picked four winners for 2008: Avon Products, PepsiCo, Coca-Cola and Procter & Gamble. All have half of their earnings from outside the United States. Each stock made hefty gains this year but has room to move higher, Ober says.
The companies have other things going for them, too. Coca-Cola made management changes and reversed sagging soft-drink sales, Ober says. PepsiCo is making more nutritional snacks that appeal to school systems.
Avon's biggest growth is in China, Ober says. The cosmetic company recently got the OK to sell door-to-door, not just in Chinese stores. Avon has been ringing doorbells and ringing up sales.
Questions? Comments? Want to share your own financial tips with readers? Contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com.