by Timothy Blankenhorn

Created on: December 06, 2008   Last Updated: December 15, 2008

There's no certainty to choosing stocks - and during recessions the risks rise by an order of magnitude. Even the most experienced ticker watchers need to be humble.

For one reason, this recession is going to be different from its predecessors. For another, if things get really bad, no business is going to prosper. That said, if your looking for some portfolio stuffers that make some sense in this newly declared (but all too familiar) recession, here are some strategies and picks that make good sense:

- Think cheap. You don't need an economics Ph.D. to look at Wal-Mart (WMT) and Home Depot (EXPD) parking lots this winter and understand where shoppers are spending their time. They're going where they get the biggest pop for their dollar. Other good Big Box bets include Costco (COST) and Target (TGT).

- Stuff folks can't live without, Part I. This is not a pretty list: beer, cigarettes, DVD rentals, video games, breakfast cereal, and kitty litter. You're not going to leave these things at the checkout counter when cash runs short. Good plays include Safeway (SWY), Kellogg (K), Nintendo (NTDOY), and Anheuser-Busch (BUD). Fast food is another play, so try YUM Brands (YUM), which owns Pizza Hut, Taco Bell, and KFC.

- Stuff folks can't live without, Part II. People need to get healthy and stay that way, so pharmaceuticals and the health industry are going to do well in a recession. All the more so, because the government is picking up more and more of the tab. Good drug company bets include Eli Lilly (LLY), Bristol-Myers Squibb (BMY), and Abbott (ABT). Health care possibilities include Varian Medical Systems (VAR) and Millipore Corp. (MIL).

- Kids are kids, and they're going to be the last people to lose their taste for what's fashionable and cool. Plus, parents will postpone goodies for themselves to keep their children happy. Toys are classic recession resistors. Look at Toys 'R' Us (TYJPY) and Mattell (MAT). And it's a good bet that what's true of toys is also true of clothes, like those at The Gap (GPS), and luxury electronics like Apple's iPod (AAPL).

- Not all banks are as dumb as Wall Street. Fact is, good regional, storefront banks are looking good, because they avoided the subprime trash - and they are making lots of cash on the spread between their loan portfolios and the current cost of funds. Wachovia (WB) and TCF Financial (TCB) are in good shape, both with branches through America's heartland. Banco Santander (SBP) in Puerto Rico is another example of a specialty bank where someone was minding the store.

- Dividend-paying stocks are popular during tough times, when the appreciation of stock are, uh, let's say, marginal. Good dividend payers include Bank of America (BAC), coal company Natural Resource Partners (NRP), and REIT Capital Source Inc. (CSE.)

- Finally, keep an eye out for start-ups. Hewlett-Packard, Microsoft, and Burger King all had their genesis during a recession. This recession will definitely gift birth to its share of winners. This is not as whacky as it sounds. With a weak job picture, it makes sense for talented would-be entrepreneurs to take the plunge and start a business. Plus, they can attract other talented, out-of-work types to give them a hand!

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