Best Buying?

I hate retail. You buy something like the Gap or Abercrombie & Fitch and it suddenly hits and air pocket, then you find out months later that they ordered the wrong color or something for the fall season -- something the industry knew all along. So I generally stay away, except during one period when I was following Arne Alsin.
But it's getting awfully cheap. The prices of some of the stocks are discounting a consumer recession, or maybe the worst Christmas since the Grinch last showed up.
In that vein, consider Best Buy. Beta's a little high, 1.64. But the company is killing Circuit City and then there's that little matter of 60 million TV sets becoming useless in Feburary 2009 unless they're converted from analog to digital. At 46.84 with a forward P/E under 13 BBY looks awfully attractive.

Adding some PEP

If you look at a 50-year chart, Altria (the old Philip Morris) is the No. 1 stock on the NYSE as Marlboro has steadily gained market share. But some of the other recession-proof consumer products companies aren't bad either. It's a good way to get rich slow -- if we could all live to be 200, it would be a slam dunk to buy these.
My favorite in recent years has been Pepsico, PEP. It's really misnamed -- Frito Lay produces more of the profits. And recently Gatorade has been their fastest growing brand. Selling at just under 20 times earnings, with a 2.0 percent yield, it's not cheap. But management seems to understand that colas is a declining business and new products. including healthy ones from the Quaker Oats family, are key. And the beta, 0.16, is nice and low.

Here we go -- Beta Breakers

Starting to think about starting my Beta Breakers portfolio for 2008 -- a few stocks that will perform well without excruciating ups and downs for the full portfolio that often tempt investors (including me) into buying and selling at the wrong times.
The main way to produce a less volatile portfolio is to buy stocks with low betas (correlations to the S&P 500) -- preferably a diverse portfolio that will do well under different economic conditions. For example, if we're going into a recession, a consumer staple company like P&G should be expected to perform well, but if the economy is accelerating, P&G would just sit there while a growth stock like Apple would probably outperform the indexes. So if you own both, you should do OK no matter what the economic conditions.
Right now, stocks I'm considering include a financial -- Bank of America perhaps, which has been beaten up but doesn't seem to have the mortgage meltdown risk of Washington Mutual. And its beta is only 0.4.
Oh yeah, for those of you not from the Bay Area, Bay to Breakers is a well-known footrace you can run in costume, or even naked. And if this portfolio doesn't work out, I'm going to feel the latter.

Up and down

The market has been choppy lately. I notice a difference in the way the credit and equity markets are pricing risk. When Ford announced better than expected earnings, its stock went up -- but Ford's KSK, which something like a synthetic preferred but is secured by senior debt -- went down. Stock people are just more optimistic.