Stocks: What to Watch for in the Recession

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3. Cash is king.

In a credit-starved economy, the advantage goes to companies with strong cash flow. Gambera cites cigarette maker Altria Group (MO) as a company famous for its strong cash generation.

A healthy balance sheet—without much debt—will also be crucial. "Given the fact that credit markets have totally deteriorated, it's a question of survival," says Gary Wolfer, chief economist at Univest Wealth Management (UVSP).

He believes survivors could include consumer staples and health-care companies that sell products their customers need and that generate lots of cash in the process. He cites Procter & Gamble (PG) and Johnson & Johnson (JNJ).

4. Don't bet on the U.S. consumer.

Wolfer predicts "an awful Christmas" for retailers. But for consumer-oriented companies, the problems aren't just short term.

For a generation, the U.S. has created a "quadruple deficit," Gambera says: a government deficit and a trade deficit, along with heavy borrowing by the financial sector and, finally, by U.S. households. Few expect Americans' reliance on credit cards and cheap home mortgages to continue (BusinessWeek, 10/9/08).

In fact, many commentators see a fundamental shift in the U.S. economy, away from a reliance on both debt and the overstretched American consumer. "The era of the consumer-based U.S. economy is coming to an end," Wolfer says. "Our whole economy is going to be much more export-driven."

5. Don't bet on the global infrastructure boom, either.

Wolfer and others may be pinning their long-term hopes for the U.S. on exports. But there are lots of worries about one force driving global demand for U.S. goods: the building boom in many emerging economies around the world.

In a global slowdown, many are betting that demand for capital equipment, commodities, and energy are going to fall off.

Emerging economies, such as China and India, may not slip into recession, but their rapid growth will probably slow, says Chad Deakins, portfolio manager of the RidgeWorth International Equity Fund. "There are going to be different problems each country is going to have to address, [problems that will] distract them from plans to build infrastructure," he says.

Five years from now, however, Deakins expect emerging countries to start building again. "There are a lot of people in the world who want a higher standard of living and are willing to work for it," he says. "That's capitalism."

Steverman is a reporter for BusinessWeek's Investing channel.