The best investor of 2008 is buying...

Tom Forester runs the only mutual fund focusing on U.S. stocks that made money last year. Here's what he's doing now.

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By Paul R. La Monica, editor at large

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Fund manager Tom Forester thinks the sell-off in oil prices and oil stocks was overdone. So he's been scooping up Valero Energy, Anadarko Petroleum and EOG Resources.

NEW YORK ( -- We all know that 2008 was a horrific year for the stock market. But to really put into perspective how terrible it was, get a load of this. Only one mutual fund that focuses on buying U.S. stocks made money in 2008. One!

And the one that did it, the Forester Value fund, barely eked into the black with a 0.4% gain. Still, any increase is certainly impressive when you consider that the S&P 500 plunged 38.5% last year.

I spoke with Forester Value manager Tom Forester back in October to ask him about his investing strategy in such a brutal market and figured that now would be a good time to get his outlook for 2009.

Three months ago, Forester was fairly defensive. Many of his top holdings were in consumer staples companies, such as food giants Kraft and H.J. Heinz. He also said he was buying shares of Wal-Mart and McDonald's, two other companies that tend to do well in times when people are keeping a close watch on what they spend.

But Forester told me yesterday afternoon that while those are still sizable holdings, he's starting to cut back on some of these more "recession-proof" stocks because he's finding better values elsewhere. And what he's buying now may surprise you.

For one, Forester said he's been taking advantage of the massive sell-off in commodities in the past few months, especially oil.

Forester said that in the past few months, he's been purchasing shares of oil refiner Valero Energy (VLO, Fortune 500), exploration and production firm Anadarko Petroleum (APC, Fortune 500) and natural gas company EOG Resources (EOG).

"Nobody can really tell what's going to happen exactly with price of oil. But as oil got closer to $35, many of the stocks seemed more reasonable than they were when oil was closer to $150," he said. "Plus, for the longer term, companies are not finding as much oil as they used to, so prices could go back up. Commodities were oversold."

Black gold isn't the only commodity play that Forester likes. He also said he's recently been attracted to the luster of real gold: he bought shares of gold mining company Newmont Mining (NEM, Fortune 500) in November when the stock was in the mid-$20s. It's now trading at about $39 a share.

Outside of commodities, Forester is also dipping his toe in two areas that have been particularly hit hard during this recession: tech and retail.

Forester already owned a big position in Microsoft when we spoke in October. But, since then, he said he's also bought a chunk of software company Symantec.

Forester said he likes Symantec (SYMC, Fortune 500), which is mainly known for its line of Norton antivirus software, because he thinks consumers and corporations will be less inclined to cut back on security spending.

He said that protecting computers is more "mission critical" -- particularly for businesses -- and this will help the company continue to generate decent revenue and profit growth. Investors seem to agree. The stock was trading around $10 when he bought it in November and now hovers closer to $14.50.

As for retail, Forester said he bought shares of Kohl's (KSS, Fortune 500) late last year on the hope that consumer spending may start to pick up again in the latter half of 2009, and that this will benefit strong operators such as Kohl's. He also said he's looking closely at J.C. Penney (JCP, Fortune 500) but has yet to buy the stock.

"The next six months for me will be a wait-and-see sort of mode. I'm not hugely defensive like I was throughout most of 2008, but I haven't gotten really aggressive yet," he said. "I want to get more aggressive. But we haven't seen this type of recession in nearly two decades. It's going to be longer than the ones we've been used to."

As such, Forester said he's also still relatively cautious about financial stocks. He does own some property and casualty insurance companies, such as Travelers and Allstate. But he's largely steered clear of banks that got caught up in the credit mess that derailed the markets and economy last year.

When I spoke to Forester in October, he told me he was considering buying Morgan Stanley and life insurer Hartford Financial because they were so beaten down. But he avoided pulling the trigger on them, since it soon became increasingly clear that each company still needed to raise more capital.

For this reason, Forester said he's only looking at financial stocks that he's convinced won't need to do deals to raise cash that will dilute the investments of current shareholders.

"In the next six months, we will see more financials needing to raise money. And those that don't are the ones I will jump into," he said.

All in all, Forester said he is confident that 2009 will be better than 2008, and he is eager to buy more stocks once it starts to become more clear that this long, painful recession is closer to the end than the beginning.

And even though Forester said he's pleased to have the distinction of being the only long-focused U.S. stock manager to have a winning year last year, he wouldn't mind some more company this year.

"It is gratifying to have made money last year, but I'm still glad to have 2008 behind us. What I want to do now is outperform on the upside. That's always more fun," he said.  To top of page

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