Stocks of restaurants, financial services, retailers bounce back

But longer term, the survivors will benefit from less competition, Henderson says. And the dealers are worlds apart from the automakers. Rather than being stuck with the large fixed costs of giant carmaking plants, auto dealers' biggest costs — commissions to salespeople — fall if revenue falls. And because car sellers cut costs quickly to respond to slowing business, many have remained profitable during some points of the downturn. Group 1, for instance, turned a profit of $8.4 million in the first quarter and has been profitable in four of the past six quarters.

"Investors failed to see how flexible and adaptable these retail models are," Henderson says. That said, Henderson doesn't expect car-retailing stocks to keep revving higher until job growth resumes and car sales heal. And that could be mid to late 2010, he says.

Companies at the epicenter of the financial crisis: Financial and housing stocks

Investors who anticipated that the government's stress test results, released this month, wouldn't be as scary as feared scored big gains on the megabanks. Bank of Americabac, Morgan Stanleyms and Wells Fargowfc are big winners, as investors took the risk of nationalization off the table. Financial services firm Prudential Financial pru, insurer Aflac afl and home builder Meritage Homes mth have also bounced back as fears about the financial system have eased. "It looks like the zombies will be resuscitated," Maltbie says.

But investors should be careful before assuming that a big recovery in some stocks means the businesses themselves will heal anytime soon.

For instance, some casino operators such as Pinnacle Entertainment pnk are up strongly, following brutal drops in those stocks. But Maltbie warns that many companies that depend on free-spending consumers, such as casinos, are likely to see a challenging business environment for years. "We have relief. Stocks dodged a big bullet," Maltbie says. "But for many companies, it's still going to be tough."

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