Good values in a rocky market

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Issue #1: America's Money - Everyday on CNN

NEW YORK (CNNMoney.com) -- It's understandable why investors and consumers would be very fearful right now.

The Dow plunged nearly 400 points Friday. Oil prices skyrocketed to yet another new record as the dollar began to weaken again. The average price of gas nationwide is now above $4 a gallon.

And oh. That credit crunch? It may not be over yet. Lehman Brothers (LEH, Fortune 500) reported a $2.8 billion quarterly loss this morning, a much bigger loss than expected.

Still, stocks took a slight turn for the better Monday morning, a possible sign that Friday's turmoil won't spark a broader panic. Oil prices retreated a little bit Monday morning and the dollar rose.

It's also worth noting that, according to a CNN/Opinion Research Poll released this morning, more than half of the 1,000 respondents said they expect the economy to be better a year from now.

Maybe it's American's ingrained sense of optimism - that can-do spirit. But I think this hopeful outlook is not misguided. Some pros agree.

"I'm still in the no-recession camp. It's clear the the economy is slowing but I don't think it will decline this year," said Jeffrey Saut, chief investment strategist for Raymond James.

So what should investors do at a time where the market is in chaos? If they have the stomach for risk, it's probably a good buying opportunity. But keep in mind, it probably makes more sense to try and find individual companies that will do well instead of betting that the whole market will head higher.

With that in mind, Saut still thinks that the energy bull run is far from over. So he's recommending oil companies Delta Petroleum (DPTR), Linn Energy (LINE) and Clayton Williams Energy (CWEI) as well as bulk shipping firm Excel Maritime Carriers. (EXM)

But Saut isn't just riding the energy wave. He also likes some telecom stocks, mainly because they pay huge dividends, which offer security in these unstable times.

Two of his favorites are Alaska Communications Systems (ALSK), which has a yield of 6.7%, and Embarq (EQ, Fortune 500), the local and long-distance spin-off of Sprint Nextel. Embarq's yield is 5.8%.

Still, investors - and consumers - need to be prepared for more volatility. There probably will be more days like Friday in the not-so-distant future.

"The markets are recalculating what is happening to corporate profits across the board and the U.S. consumer," said Quincy Krosby, chief market strategist with the Hartford. "We'll have some good days and we'll have some bad days. Investors are trying to figure out how to cope with higher energy prices."

Krosby does see some eventual relief on the oil price front. However, she cautions that it may take some time before prices finally start to cool off.

"Ultimately, higher oil prices will continue to slow down economic growth and demand not just in the U.S. but in Europe and emerging markets. So we should see oil prices recede because of fundamentals," she said. "That points to a slowdown in commodities down the road but that's a six- to 12-month story."

In other words, the market, as well as the overall economy, may just stay in a funk for an extended period of time.

Lower interest rates and the impact of the government's tax rebates may help prevent the economy from getting worse but it may not be enough to counteract rising prices at the pump and give the economy a much-needed kick start.

"High oil prices are negating the economic impact of the stimulus checks and prolonging this period of economic and market stagnation," wrote David Kelly, chief market strategist with JPMorgan Funds in a note to clients Monday morning.

But as Saut points out, environments like this can provide great investment opportunities. So this isn't the time to go sticking your head in the sand either.

"I'm not looking for miracles but it's a mistake to get too bearish here," he said. "It's a market of stocks, not a stock market. There's always something going up."

Issue #1 - America's Money: All this week at noon ET, CNN explains how the weakening economy affects you. Full coverage.

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