With all of the major indices now in bear market territory it seems as though the best way for a long investor to play this market is to avoid the losing stocks and switch into the winners. I sometimes liken investing to gambling, but the advantage of investing over gambling is that you can change your bet at any time. Imagine if you were playing blackjack only to find that you had a very weak hand. But in this particular game of blackjack you can swap cards with the person sitting next to you and as luck would have it, that person has a very strong hand that looks very likely to win. Now, you could always risk going bust and take another card to try to strengthen your hand, but if given the option virtually any gambler would take the bet that is closer to a sure thing. Unfortunately when gambling a player doesn't have the option to change his/her hand, but an investor can change investments at any time.
So, my question to all of the investors out there is simple. Would you rather risk your money in the struggling industries of the market or would you like to put your money in an industry that is actually making money in 2008? Or for those of you who enjoyed my gambling analogy above, would you rather hold the cards that lose more often than not or the cards that have won more than not?
For those of you that want to bet on the industries that have been outperforming the market then I would recommend investing in industries that are more or less "recession proof". Typically investors think of such industries as grocery and tobacco as "recession proof", but I'm here to suggest another industry that is, as a whole, reporting in positive territory in a year that has seen all of the major indices fall into bear market territory. That industry is garbage disposal, otherwise known as waste management services.
Why is this industry performing so steadily? It's simple really, this industry always performs quite steadily. People, in times of boom or recession, will always produce garbage, as will businesses and municipalities.
The beauty of the business model for the waste disposal companies is that, for many of their customers, they charge a set period fee regardless of the amount of trash taken. Most customers (especially individual people) have to pay the waste disposal companies the same amount whether or not their trash can is full every week. So, even if individuals were able to cut back on their trash levels, they are locked in on their garbage disposal prices.
Waste disposal companies are also finding ways to benefit from one of the more popular trends...recycling.
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