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Wednesday, December 31, 2008

The Lucky 22

NEW YORK ( -- While Wall Street has taken monumental losses that far outnumber gains this year, one sector has managed to weather the storm better than others - consumer-related stocks that include big names like Wal-Mart and McDonald's.

Of the 500 companies in S&P 500 index, which represents a broad cross-section of the nation's economy, a mere 22 saw their stock prices end the year in the black. But among those, nearly half came under the consumer-related umbrella.

"If there is one pattern we can discern, it's that investors have been buying stocks that they think will benefit from people moving down the buying ladder," said Brian Gendreau, an investment strategist at ING Investment Management in New York. "People have to buy certain consumer staples, whether or not we're in a recession."

That comes against a grim backdrop. The overall index is down nearly 41% from the start of the year, and is headed for its worst annual performance since the S&P 500 debuted in 1957.

This year's losses have been broad based, with all S&P 500 sectors showing double-digit percentage losses, including a staggering 59.4% retreat for the financial sector.

Stocks in the materials sector are down 48.1% for the year, and information technology stocks were off 45.1% as of Tuesday's close.

But the consumer staples sector, which includes some of this year's best performing stocks, is down a comparatively benign 19.3%. And while the consumer discretionary sector is down 26%, it includes seven of this year's best performers.

Indeed, discount retailer Family Dollar Stores (FDO, Fortune 500) is on track to become the S&P 500's top stock of the year. As of Tuesday, its stock was up 32.7% year to date.

Other consumer-related stocks posting significant gains include the world's largest retailer, Wal-Mart Stores (WMT, Fortune 500), which is up nearly 16% for the year, and fast-food giant McDonald's (MCD, Fortune 500), which has advanced 4.8%. These blue chip stocks are also the only two Dow components posting gains this year.

And if there's one stock that shows vices are recession proof, it's UST. Shares of UST Inc. (UST), which makes smokeless tobacco products and wine, are up 26.3% this year and are ranked as the S&P 500's second-best performing stock of the year.

Meanwhile, biotech and biopharmaceutical firms also fared well this year.

Shares of biotechnology company Amgen Inc. (AMGN, Fortune 500) are up 24% for the year. Celgene Corp. (CELG), which makes the cancer and leprosy drug Revlimid, gained 18.2%.

And, while the nation's auto industry has been teetering on the verge of bankruptcy, shares of AutoZone (AZO, Fortune 500), an auto parts and accessories retailer, have gained nearly 11% this year.

Finally, tax consulting firm H&R Block (HRB) is another stock that has done well despite a difficult environment. Its stock is up more than 20% this year.

While 2008 will go down as one of the most painful years on record, some analysts think now may be the time to start buying again.

"The market has already been showing signs of a bottom," Gendreau said. And stocks could get a boost from a "massive fiscal stimulus" when the Obama administration takes office next year, he added.

"If you wait until you see concrete signs of recovery in the economy, you've probably already missed most of the rally," said Gendreau. To top of page