It's a tough market right now, and people need to be careful with their investments. But before shunning the market, consider some areas that people may not have really thought about before. Jim Cramer, host of CNBC's “Mad Money,” lists five investments that have potential:
Natural gasOil prices are going up, reaching nearly $100 a barrel, and companies are becoming more environmentally conscious — there will soon be big changes on pollution limits due to greenhouse gasses and global warming. Therefore, companies are searching for alternative energy sources, and natural gas is at the top of the list. Originally, people mistakenly thought there wasn't enough natural gas available, but they were wrong. We have tons of natural gas here in North America — and it’s cheap to get out.
You can expect companies and developers to switch to natural gas from coal (which is too dirty) from oil (which is too expensive) and from nuclear (which takes too long to build). Another point to consider is that natural gas will pass the muster of the Democrats. When you talk about fuels, there is only one fuel that has no enemies. That's natural gas.
In terms of picking the right natural gas company to invest in, choose companies that have the deepest natural gas reserves. Also consider companies that focus exclusively on natural gas, rather than try to cover other energy sources like oil.
Agriculture is becoming a big growth area as we look for alternative energy resources, much like natural gas. Seed producers have become the new oil-drilling companies, since seeds are where all this new energy comes from. Moreover, they’re producing the plants that retain the most energy.
In fact, this might be the new biotech market. In particular, corn and soy, since they’re going to provide fuel for the future.
A recent article in BusinessWeek highlighted the great fortune of Monsanto, an agricultural company with a stock that has soared as investors anticipate years of double-digit growth from innovative seeds. The company has spent years funneling billions of dollars into research and development, coming up with new seeds to help farmers grow more corn, soybeans and other crops. Now, it's harvesting the benefits of this investment. Monsanto, and many analysts, predict a steady stream of innovative new seeds coming out of the company well into the next decade.
Video gamesVideo games are some of the big-ticket items this holiday shopping season. Have you been to a Gamestop lately? This is the most powerful retail trend out there that no one knows about — video games for adults. Electronic arts, Activision, and a few other video game producers have all been doing well.
Latin America is the best emerging market, featuring a combination of natural resources and an emerging middle class that make owning anything from paper companies to oils to banks make sense. Brazil is energy self-sufficient, which is unusual in Western economies. They have well-run oil companies and the lowest ethanol prices — and can easily switch to either one. Also, Brazil just discovered mortgages and credit cards, creating an emerging middle class which is buying stuff like crazy. And for the first time, we see a stable government taking advantage of these changes.
When investing in Latin America, consider companies that are most like American companies. For example, Brazil has energy companies, banks and telephone companies that are all run and structured much like their American counterparts.
CanadaCanada is as stable, if not more so at this point, as the United States. They have a strong currency that recently reached parity with the U.S. dollar for the first time in nearly 30 years. They are a low-inflation/high-growth nation that has bountiful resources and have natural resources that everyone covets. Canada has lots of oil, natural gas, and an incredible amount of nickel, which is a hugely important mineral that no one has enough of, and gold.
Given the wealth of resources in Canada, resource companies might be your safest bet.
Final tips: Do your homework, and research the companies. Also, go with the best of the breed, no matter how expensive, since those will be more secure. And cheaper stocks don't necessarily mean less risk. If that stock dives, you still lose 100 percent of your money.
If you're conservative, you may want to go with companies that have operations in America. Historically, this has been the safest place, even though the bigger growth potential is overseas. If you're more willing to take risks and recognize the U.S. is no longer as important as it once was, Brazil and Canada have great potential.
Disclaimer: All recommendations expressed by Jim Cramer are solely his and are not the opinions of NBC, and may have been previously disseminated by him. Before acting on a recommendation, consider its suitability for your circumstances and consider seeking advice from your own financial advisor.