On Friday, one of the Dow’s bright spots was insurers. There have already been hints that a major household name in the space has been on the verge of going out of business. Judging from the action in the equities, it would seem the two most in need of a cash injection are the Hartford Group (HIG) and Metropolitan Life (MET).

Other beneficiaries include Genworth (GNW) and Prudential Insurance (PRU). Shares appreciated for Chubb (CB), Travelers (TVL) and Lincoln (LNC). Curiously, Met Life, Marsh & McClendon (MMC) and AllState (ALL) all suffered declines.

Key insurance indices and exchange-traded funds have been forming something of a base, with the Dow Jones US Insurance Index at a double-bottom position. There's room for a 20% relief rally, but one would have to be nimble.


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At this point, I think fear will give way to curiosity about what to own coming out of the ashes. Some things will come back faster than others. Growing up in Harlem, I saw a lot of vacant lots in the neighborhood that everyone knew would be worth a lot of money one day. It took a long time for that to happen, and now most people that lived around the rubble can’t afford to live in the new condos.

On the other hand, the real estate in Albania and the former Yugoslavia was dirt-cheap during the war in the Balkans, and many investors became very wealthy in a short period of time. We’ve seen the same thing here in the stock market. After the end of the dot-com bubble, every Internet stock bombed; everything else associated with technology suffered mightily.

I think a lot of stocks are going to rebound no matter what and make for great near term and long term opportunities. By the same token, I think there are even more stocks that will rally over time and reach even greater heights. After the last meltdown in the market, many thought Amazon (AMZN) and Yahoo (YHOO) would rebound; they did, but there was a lot of money to be made in lesser known companies like Stamps.com (STMP).

After peaking at $168.00 a share in November 1999, STMP shares began sliding before finally bottoming out at $4.60 in September 2001 - but not before 2 rallies lifted the share price 50% earlier in the year. By April 2006, the shares were back to $40.

I’m not sure if the stock will ever get back to $168, but those that bought in 2001 and 2002 made significant gains.



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Then there are stocks that will go on to even greater heights. International Business Machines (IBM) has had a couple of brushes with death over the past 2 decades. The most infamous began in 1987 and lasted until 1993. During that time, the company saw its fortunes peak in 1987, though the company held its own for a few years even as its business fortunes began declining.

Finally, due to declining demand for giant and expensive mainframe computers, the company reported a fiscal-year 1992 loss of $4.97 billion - then a record in American business. Management cut the dividend to $0.54 from $1.21, and the board ousted CEO John Akers.

IBM's other serious test came after the bursting of the dot-com bubble. Investors who bought IBM in the summer of 1993 and held the stock for 6 years enjoyed a 1000% return.

Hindsight is 20/20, but the benefit of history gives us a glimpse of what’s possible. The next few months -- possibly years -- won't be smooth sailing. But they may yield the best money-making opportunities for those who take advantage of extreme oversold conditions, periodic rallies and long-term potential.



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