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Want To Invest In Down Market? 3 Stock To Buy When Market Slides

The U.S. stock market gave up almost all the gains it made in 2012 after the latest jobs report from the Labor Department suggested a puny gain of 69, 000 jobs for May. The Dow slipped into negative territory for the year, the benchmark S & P 500 retreated to its January level, and the Nasdaq Composite slipped by 2.82% in a single day. The widespread panic quickly forced most analysts to lower their forecast for the whole year, which further compounded the economic malaise, even as global stock markets also lost ground.

Amidst this contagious pessimism, a few stocks seem to have reached the bottom recommended by analysts to be a buy signal.

Here Are 3 Stocks To Watch In A Down Market

  • Walgreen’s: The conflict that Walgreen’s had with its former pharmacy benefit manager and partner, Express Scripts, has been very costly. The dispute erupted when Express Scripts demanded higher reimbursement fees and Walgreen’s refused. The company lost a quarter of its market value in a matter of just a few months, despite reporting a 69% increase in EPS from a year ago. Revenues increased by 6.5% and same store sales improved by 4.4%, a strong indication of health.
    • However, both companies have just made the announcement that the lawsuit is being ended, removing a dark cloud over Walgreen’s.
    • Some analysts have now declared Walgreen’s to be a bottom fisher’s special, with its share recently hitting a 52 week low in the $33 range.
    • Revenues are expected to rise in the 5% to 6% range for 2012, aided by 250 net new store openings, which tend to be located in high traffic areas. The stock pays dividends with the yield at 3%, and still trades at a depressed 10 times EPS.
    • People are still getting older and need a safe, convenient place to shop for their prescriptions.
    • The stock is forecasted to rise to the $38-$40 range by the end of 2012.
  • Men’s Warehouse: Jos. A Banks, the main competitor of Men’s Warehouse, runs constant promotions that target the higher end business suit market, leaving Men’s Warehouse to capture the middle market for consumers who prefer quality over the snazzy look.
    • Men’s Warehouse focuses on how their customers will look, and only occasionally run promotions, a strategy that is not detrimental to margins and the bottom line. Rather. discounts can be found at K&G Stores, which account for 16% of Men’s Warehouse’s sales. Tuxedo rentals account for another 16% of sales, and Men’s Warehouse has the biggest presence from coast to coast.
    • The stock currently sells for 12 times EPS, and with EPS expected to rise by 18% in 2012 and 13% in 2013, this means that the stock can be had for a Price/Earnings to Growth (PEG) of less than 1.0. How often do you see a stock that cheap? Moreover, the dividend yield has recently been boosted to 2.1%, and with no debt and $125 Million sitting in the bank, equivalent to $2.50 per share, better things can happen.
  • British Petroleum: The situation in Europe may still be dire, but BP delivers a mouth watering 5.2% dividend yield, while throwing off a huge cash flow. The disastrous Gulf of Mexico oil spill has already been factored into the price and BP has sued Halliburton Co. a few months ago to recover all costs and damages related to the oil spill.

The stock trades for less than five times earnings, and analysts have variously advised investors to wait for a $40 bottom. BP is trading in the $36 range in June 2012.

These 3 stocks to watch in a down market are perfect candidates for further observation, especially if the crisis in Europe worsens and the U.S. stock market takes another stumble in the near future.

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