Three Rules for Stock Picks in These Days

1. Big & Safe. It is the bear market, even the S&P 500 is on the wild ride. First, you know there is little that you can do to avoid the portfolio up and down like wild, but better it won't be THAT wild. And second, one step back, you are mentally strong enough to live with the daily up and downs, but the bottom line, the stocks need to somewhat retain their value, and you don't want to go to bed every night with the fear that the money you invested may vanish the next morning you wake up. Simply put, you want you money safe. And to make it safe, think big, and I mean big companies - those big names that you know they are going to survive the world wide storm, even they may not be an attractive growth company. True, buying stock is to buy the growth, but the entire stock market is depressed, and it needs to restore to normal before expanding and growing again. In addition, companies with higher growth potential usually bear higher risks. And in today's market, these risks may turn out to be fatal. So, I look at companies that are safe & big.

2. International Revenue. In the past several years, the areas that exhibited the hottest economic growth are Asian countries such as China, India, Latin America and Australia. For mature companies from developed countries, to grow revenue from these areas became a natural choice, and more critically, it helped to offset the previously inevitable volatility of some cyclical industries. No doubt, in today's world most of the countries are economically interdependent, which explains why financial crisis of the US eventually brought the entire world into recession. However, this independence doesn't necessarily mean the economy of different countries has to come back to life at the same pace. Therefore, companies with distributed revenue from across the world has significant edge over those that exclusively tie to one single market. And this is Rule the 2nd, pick companies that have significant international revenue.

3. Companies that rebound fast & first. This is a tricky one. Basically I am looking at companies of two types. First, companies that still deliver healthy growth despite worsening macro-economic environment, and the stock price is depressed solely because of the overall market. And second, companies in industries that likely rebound first when the economic trend turns, or even more better, industries that will drive the entire economy up. Here, think about companies in health care, and those closely related to consumer spending.

Based on the three rules above, there are four companies standing out, MasterCard (MA), Visa (V), Apple (AAPL) and Nike (NKE). In the next few days/weeks, I am going to write up some detailed analysis of these four.