Winning Stocks: Buying Back In on the Cheap

Oct. 15, 2008— -- There is a massive sale going on now on Wall Street, and if you have some spare cash to invest, many advisers say this is the perfect time to buy.

But with all the turmoil and trauma that has plagued the market in recent weeks, everyday investors need to be careful and thoughtful before throwing their cash into stocks.

"People should be doing what they're most comfortable with, which is probably staying with the tried and true companies," said Stephen Leeb, chairman of the investment committee at Leeb Capital Management.

Leeb said that last week the market "took no prisoners." Basically, the healthy companies fell along with the bad ones. Now, they are at a bargain.

He suggested purchasing stock in companies such as Johnson & Johnson, ExxonMobil and Warren Buffet's Berkshire Hathaway.

"These companies with limited risk would be certainly high on my shopping list," Leeb said. "Some of them have never been cheaper."

For instance, Berkshire Hathaway class B shares are now trading for about $4,000 a share, down from a high of $5,000.

Leeb also suggested defense companies including Northrop Grumman and Raytheon.

"These tend to be economically immune. So even if you're too early and even if the world is going through a very, very big shakeout, we're still going to need defense. These companies should be fine."

Northrop, for instance, is trading for about $45 a share, down from about $85 in December.

Utility companies are also a relatively safe bet. Leeb suggests FLP, which is a major wind producer, or Excelon, the largest nuclear utility in the country.

"These are companies that should do well in all but the most-unimaginably poor economic environments," he said. "You're getting a lot of safety with these stocks plus tremendous upside potential."

He called these "get rich slow stocks."

Tim Hanson, senior analyst at the Motley Fool, said, "Now is a fabulous time to be an investor."

But the stock market is not the answer for everybody.

"If it's money that you need to spend on your retirement, or on rent or on tuition or anything like that in the next three to five years," don't invest in stocks, Hanson said. "The market is extremely volatile. I don't know if anybody really knows exactly what is going to happen."