2009 Is "All About the Company"

2008 has been "All About the Economy" It didn't seem to matter what stock you picked because they all went down. However, some sectors did far worse than others. We believe success in 2009 will be "All About the Company". It is a stock pickers year. The financial crisis will hopefully become yesterday's news at some point in the next few months and the financial stability and growth of companies will dominate one's success in the stock market.

This morning, General Mills reported earnings which slightly dropped on higher food-hedging costs but its sales seem to be charging ahead in this weak economic environment. Consumer staples such as basic food is clearly defensive and General Mills is outperforming most companies in this regard. On the other hand, Morgan Stanley announced weaker numbers than expected as they booked large losses and experienced weaker business trends in the capital markets. The contrast of these two companies will likely be a scenario we discuss throughout 2009.

Yesterday, the markets rallied across the board as investors cheered the Federal Reserves interest rate cuts and its desire to do what is necessary to jump start the economy. All sectors rose and many pundits viewed the rise in stocks as the beginning of a Christmas rally. The markets seem to ignore bad news these days which is a good sign for a market bottom but we are not convinced that the recession won't be longer and deeper than the markets are assuming.

Will there be any fallout from the Madoff affair? All the details are not out and the effects on the financial markets are not known. Are there other disasters lurking in the weeds? Perhaps. Can Morgan Stanley, Goldman Sachs, and Citigroup right their ships? Hopefully. Will Apple surprise everyone with a slowdown in their great business? These are just a few topics to ponder which might keep the volatility in stocks, commodities, and interest rates. We do believe the markets are in the bottoming phase but it won't be straight up from here. The stronger companies will become stronger and the weak will wither away or eventually get bought.