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Get Defensive with Healthcare

Written By Brian Hicks

Posted January 15, 2008

Dear Wealth Daily reader:

"When the women stop buying, it’s game over."

That’s what Quantum Confidential editor Steve Christ told me today over IM.

I told Steve, "If you’re a retailer, yes. But husbands all across America are getting their credit card statements from last month, and they’re sighing in relief."

Steve was referring to today’s retail sales report that was released for the month of December. According to the report:


"Particularly hard hit were apparel sellers including Limited Brands and Ann Taylor Stores as well as department stores including Macy’s Inc.

"Limited posted an 8% drop in same-store sales, worse than the 4% Wall Street expected. Based on weak sales, it said it is likely that fourth-quarter earnings will fall toward the low-to-midpoint of its previously announced projections."

I knew Steve was joking when he said that, but I also knew there was some truth behind his comment.

I told him, "Look, when my wife stops buying shoes and handbags, it’s a blessing to my bank account. However, if I stop buying beer . . . then you know the economy is in Armageddon."

On the bright side, Wal-Mart, the world’s largest retailer and most-hated corporation among the wealthy, posted a 2.4% increase in same-store sales, exceeding the 1.8% forecast. But the discounter said that its fourth-quarter results will be "pressured by higher interest expense" compared to last year.

Costco reported a 7% increase in same-store sales, better than the 5.6% estimate.

Every economically sensitive stock has gotten hammered. Even the retail discounters have gotten crushed. Take a look at Family Dollar and Dollar Tree Stores:



These stocks are near or at five-year lows. I smell some bottom-fishing coming. Maybe.

Remember, stocks are a leading indicator of the economy, not a lagging indicator. I believe we’re close to a massive buying opportunity.

I mean, Citigroup is trading at a 5-yr low. Is it time to step in? I don’t know. Only time will tell. But I’m not though.

For now, we’ll remain defensive with energy, select technology names, gold and mining, and healthcare.

Last  month I recommended Anavex Life Sciences (AVXL: OTCBB) to you around $4 a share. Anavex has remained rock solid during this recent selloff. When the market turns around and bounces, this biotech stock is going to shoot to the moon. Make sure you’re holding this stock at cheap levels, which means $5.50 to $6 a share.

Down and Out in New York City

Tuesday I took a trip to New York City to be a guest on Fox’s Happy Hour show hosted by the lovely Rebecca Gomez. Yes, she’s even more beautiful in person.

While on the show, I made a prediction that by the second-quarter of this year we would see at least two homebuilders go under. I believe those homebuilders will be Beazer and Hovnanian.

Take a look at their stock charts:



The problem with a homebuilder like Hovnanian is that it’s eating through its cash like Rosie O’Donnell at a $4.95 all-you-can-eat buffet. HOV has $12 million in the bank . . . and $2.3 BILLION in debt. How it survives is anybody’s guess.

But one person’s misery is another’s gain. Ian Cooper was shorting homebuilders and related stocks all throughout 2006 and 2007.

He made 214% shorting New Century and 108% on Countrywide Financial on just two put option trades.

Very soon we’ll be launching Ian Cooper’s Options Trading Pit, which will give you the opportunity to play the market at both ends . . . and everything in between.

Until then, I urge you to sign up for Ian’s Small Cap Trading Pit: