I seek to identify companies with market values well below their values based on fundamental analysis. I focus primarily on these industries:
Consumer staples - traditional defensive sector, with some companies positioned to benefit from falling commodity costs.
Insurance and financial services - Some insurers have strong balance sheets and will benefit from what is likely to be a relatively "hard" market in 2009. Banks are rebuilding capital, aided by TARP and Fed actions (but right now most seem either overvalued or impossible to value).
Health care / Pharma - while this sector is not immune to a recession, it will continue to benefit from demographic trends. The leaders have strong balance sheets and pay attractive dividends.
Technology - many companies are flush with cash, and some have attractive growth opportunities even in a recession.
Retail and apparel - a beaten down sector, mostly for good reason, but some strong brands have become good values.
For each company profiled here, I have done in-depth research, including analysis of public filings, investor presentations, earnings calls, market trends, trade journals, and comparable companies. With consumer products, insurance, technology, and retail companies, I leverage my executive network and experience investing in these industries.
XL Capital: Summary of Q3 2008 Fixed Income Portfolio