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Sept. 23, 2011, 12:01 a.m. EDT
By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” Yikes!
This is a crash. We're down more than 20% from the peak earlier this year. People are panicking. Investors are dumping what they can.
How much worse can it get? Plenty.
Where can you hide?
At a time like this, it's tough. Many governments are broke. And those who aren't, are paying you diddle-squat in interest. The 10-year Swiss government bond yields less than 1%.
But here comes Andrew Garthwaite, strategist at investment bank CSFB, with six intriguing ideas.
Or, to be accurate, one idea with six recommendations.
His call? Look for the stocks that are even better than government bonds!
In a topsy-turvy market that's breaking most of the old rules, this is the kind of smart thinking that gets my attention.
Garthwaite and his team have screened the market for select names that meet four tough criteria.
First, they have to be big companies. It's no use trying to find safety in smaller and mid-sized companies in this market. Smaller company stocks are expensive in relative terms anyway. And they get hosed in an economic slump. Their stocks get pounded and they find it hard to borrow money.
Two, they have to be financially strong. CSFB looked for companies with government-like credit. In particular, they screened for companies where default insurance on the bonds, as measured by credit default swaps, is actually cheaper than it is for sovereign governments.
As the market tumbles, The Reformed Stock Broker, Josh Brown, offers up his "Ten Crash Commandments", or tips for surviving the market sell-off to Paul Vigna and Shira Ovide on The Markets Hub.
Third, they screened for companies whose dividend yield is actually higher than the yield on government bonds. Investors need reliable sources of income, now more than usual.
Fourth, and finally, they screened for companies with multinational income sources. The wider you cast your net, the less vulnerable you are. Companies doing business all over the world are likely in a better situation than those heavily exposed to a few markets.
That's the theory. The result? CSFB came up with six solid stocks:
Novartis /quotes/zigman/171707/quotes/nls/nvs NVS -0.93% . Pharmaceuticals. P/E (next twelve months): 12. Dividend yield: 3.7%.
British American Tobacco /quotes/zigman/233120/quotes/nls/bti BTI +0.47% . Cigarettes. P/E: 12. Dividend yield: 4.7%.
Intel /quotes/zigman/20392/quotes/nls/intc INTC +2.29% . Computer chips. P/E: 9. Dividend yield: 3.9%.
Vodafone /quotes/zigman/101873/quotes/nls/vod VOD +1.63% . Mobile telecoms. P/E: 9. Dividend yield: 5.8%.
Coca-Cola /quotes/zigman/222647/quotes/nls/ko KO -0.88% . Soft drinks. P/E: 16. Dividend yield: 2.8%.
Microsoft /quotes/zigman/20493/quotes/nls/msft MSFT -0.65% . Software. P/E: 9. Dividend yield: 3.2%.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for the Wall Street Journal.
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S... Expand
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co. Collapse
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