Many "expert" investors have rules set out for how to invest in companies during recessions. These people say stick with "recession proof" stocks, as I stated in an earlier post. The idea of this investing method is that recession proof stocks will not go down much during a recession. The companies will not grow in earnings drastically, but at least they will not go down. But that is kind of safe and boring. What if you are young, can afford to take some risk, and are looking to make a lot of money? You probably think I am crazy for thinking you can make big money in today's heinous market. But you can. To do so, look for companies that will end up growing their business because of unemployment.
For example, online education. Companies like American Public Education Inc. (AEPI) might actually do well with unemployment. As people lose their jobs, they will turn to education. When you cannot find a job, going back to school is a good option. More importantly, for those with families, traveling to school might not be an option. Here comes the role of online colleges. Online Colleges like AEPI will probably see their earnings grow when unemployment rises, meaning they could be a good investment. Another example is auto mechanics and car parts suppliers. When people cut down on spending, they will not be buying new cars. Since they do not buy new cars, their cars get older and need repairs. Companies like AutoZone, Inc. are poised to increase earnings from an aging American car fleet because people will need to buy parts in order to fix their existing cars, rather than buying a new car. In short, if you are looking to make big money in the market, while accepting the increased risk, look for stocks that will play off of the bad economy, stocks that benefit from unemployment and lower consumer spending.