also from Motley Fool

My disclosure: my wife owns USG. I own LM.

The Best Opportunity This Decade

http://www.fool.com/investing/value/2008/02/12/the-best-opportunity-this-decade.aspx

Jim Mueller
February 12, 2008

Over the past 60 years, the United States has seen, and survived, 10 recessions (not counting the one we may or may not be in at present). From the shortest one of six months in 1980 to the two that spanned 1973-1975 and 1981-1982, we've muddled through and come out the other side. In between each, we've experienced, on average, almost five years of expansion.

So while we may be entering another recession right now, I'm excited!

Pardon me while I wipe my chin
First, we have a whole bunch of people running around in panic mode crying, "The sky is falling!" They don't want to hold stocks during a recession, so they're willing to sell them -- cheap.

Second, the news media fans the flames of panic with constant stories about weakening consumer spending and the specter of recession.

Third, we've got a handful of really hated companies. Specifically, I'm talking about the banks, thrifts, and builders that caused and are feeling the fallout from the mess we're in.

What does that add up to? Bargains.

Like a kid in a candy store ... and the candy's on sale
One option is an investment company -- like Goldman Sachs (NYSE: GS), which has pretty much steered clear of bad collateralized debt obligations and mortgage-backed securities, yet its price has dropped 20% alongside others in the industry (Merrill Lynch (NYSE: MER), for example) that were entwined in the current crisis. Heck, if Merrill gets cheap enough, I'll even take a look at it. (Even bad companies can be good investments if you get them at the right price.)

Then there are homebuilders. While some might go bankrupt, conservative and well-capitalized firms will survive. MDC Holdings (NYSE: MDC) is clearly in the latter category.

Then there are the materials suppliers, such as USG (NYSE: USG), which have declined along with the sector. But this is another strong company that Warren Buffett owns and that we recommended in our Motley Fool Inside Value investing service. So while the sector is volatile on the whole, there are some very intriguing individual opportunities.

Finally, there are retailers. All that talk about lower consumer spending in 2008 has driven prices way down. It doesn't matter if you're a building retailer such as Home Depot (NYSE: HD) or a teeny-bopper supplier such as American Eagle Outfitters (NYSE: AEO). But really, who cares about 2008? For my money, I'm more interested in companies I can buy and own in 2013 -- so thanks for the bargains!

"When Miller and Nygren speak, people listen."
Investing in the above industries might seem counterintuitive now, but Bill Miller of Legg Mason says au contraire.

[Several] years ago, everyone wanted tech and Internet and telecom stocks. ... The time to buy them was in 1994 or 1995, when they were cheap. But in 1994 or 1995, people wanted banks and small and mid caps, which should have been bought in 1990, and well, you get the picture.

Bill Nygren, another great value investor, agrees. Looking at the current economic situation, he wrote, "What usually happens is that suffering industries begin to recover, the next crisis comes from somewhere least expected, and the cycle of creating new investment opportunities starts anew. We have no reason to believe it will be different this time."

What these gentlemen know is that investing today in areas that aren't well-liked will position your portfolio for when we come out of this bear market. There will be another bull market. What we have now is the chance to grab some good companies while they're cheap.

So what are you going to do? Stop investing in stocks altogether, worried that things will be different this time? Or listen to master investors (not me -- Miller and Nygren!) and look at some opportunities?

I know what I'm doing and I can hardly wait.

Jim Mueller owns shares of USG and American Eagle, but no other company mentioned. The Motley Fool also owns shares of American Eagle. USG, Legg Mason, and Home Depot are Inside Value recommendations. American Eagle is recommended in Stock Advisor. MDC Holdings is a Motley Fool Hidden Gems pick. The Fool has a disclosure policy.