No one can say that 2008 was a banner year for the US Economy. With massive job losses, $700 billion bailouts and the near collapse of the auto industry, the year resembled a flashback to the Great Depression of the 30's. Most economists suggest that 2009 may not be much better. For the investor concerned with making a profit in 2009 there are many bad choices out there. However, some choices are worse than others. This article will detail specific industries and stocks that absolutely positively should be avoided.
The first industry to avoid is Manufacturing. Clearly, as the economy slides so does the demand for new goods. Less demand means more layoffs in a field that has already been battered by outsourcing and the transition to more service based industries. One company that stands to be hurt is 3m(MMM). The multi national conglomerate formerly known as Minnesota Mining and Manufacturing has already lost about a 1/4% of its value in the last few months and the strengthening of the dollar could limit any gains it may achieve later in the year.
Another industry that probably will not fare well is the airline industry. There are three clear reasons for this. First, with more people unemployed there will be a drop in family flights for vacations. Second, companies looking to cut costs will probably do so by cutting back on unnecessary business flights. Third, there is every reason to believe the price of oil will climb in 2009 thus making it more expensive for planes to fly. These three factors make the airline industry toxic. So avoid companies like Delta Airlines(DAL) and aircraft maker Boeing(BA). Delta Airlines has another strike against it: it recently merged with Northwest Airlines. Even in the best of times such mergers lead to uncertainty and 2009 is not looking like the best of times.
Next on the list of industries to avoid are companies that specialize in credit. Much of the recent downturn was inspired by people defaulting on mortgages. Should the downturn continue and more people struggle with unemployment, expect more credit card bills to go unpaid. Therefore, credit card companies like Discover(DFS) and Capital One(COF) should take a beating this year. In short, give no credit to credit.
Of course I'd be ignoring the elephant in the room if I didn't mention the banking industry. Healthy industries do not need financial bailouts much less $700 billion ones . Citigroup(C), in particular, looks to be in very bad shape. With over 2 trillion in assets supported by a very small amount of actual equity it seems likely that it will need more aid from the government just to stay alive. 2009 may prove to be the year the obituary is written for Citigroup.
In general, 2009 looks to be a rocky road for investors. If you plan on travelling down the road anyway, I hope these suggestions help make the path a little smoother.