Another day, another hair-pullingly tumultuous stock market. Zacks Senior Market Analyst Charles Rotblut, CFA was thankfully on-hand to talk us through this most precarious time with practical knowledge of what we should be doing next.

The markets recouped some of their losses late yesterday. Is this a sign that a bottom has been set?

A lot of people have been trying to predict when stocks will stop falling, and nearly all of these people have been wrong. It’s very difficult to predict a market bottom, or top. And for the overwhelming majority of investors, it does not matter.

Rather, investors should be focusing on looking for fundamentally sound companies with rising earnings estimates that are trading at attractive valuations. This is a strategy that has worked over the long-term and will continue to work in the future.

So, when will investors feel safe investing?

Over the short-term, there is a real risk that stocks could fall even further. The selling is indiscriminate and good stocks are falling in price, but at some point buyers will step back in and pick up bargains. Therefore, investors should consider dollar-cost averaging. This means buying shares in a company over a period of months instead of all at once. Commissions are cheap enough that if you can build your position without incurring large transaction costs.

What stocks should investors look at?

In the current market environment, I would suggest going towards larger, more established companies.

The big pharmaceuticals, such as Abbott Labs (ABT) and Bristol-Myers (BMY), are less economically sensitive because people need to keep taking their medication. General Dynamics (GD) does a lot of business with the government, and the next president is unlikely to cut back on defense spending. Smith International (SII) makes drilling equipment for oil companies. It is very shareholder-friendly and will do well as long as oil stays above $65 per barrel. I also like CSX Corp. (CSX), which is a railroad. The company recently raised its earnings guidance through 2010 – a bullish sign.

Any other advice?

Yes. Investors need to stay proactive in managing their portfolios. Don’t be afraid to sell a stock if business conditions have worsened. Equally important — keep researching stocks. Even you don’t want to buy right now, you should have a list of stocks you would buy if conditions improved.

Charles Rotblut, CFA is the Senior Market Analyst for Zacks.com.

“CSX” Free Stock Analysis: Buy? Sell? Hold?
“GD” Free Stock Analysis: Buy? Sell? Hold?
“ABT” Free Stock Analysis: Buy? Sell? Hold?
“BMY” Free Stock Analysis: Buy? Sell? Hold?
“SII” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Last 5 posts by Charles Rotblut

• Final Thoughts - Market Analysis - October 26th, 2009
• Earnings Preview for Oct 26 - 30 - Earnings Preview - October 23rd, 2009
• Zacks Industry Rank Analysis Highlights: Barrick Gold, Eldorado, Goldcorp, Freeport-McMoRan, Pan American Silver, Market Vectors Gold Miners, S&P 500 SPDR and Gold SPDR - Press Releases - October 22nd, 2009
• Gold Miners' Margin Problem - Zacks Industry Rank Analysis - October 21st, 2009
• Zacks Earnings Preview: Eastman Chemical, E.I. DuPont, T. Rowe Price, Western Digital and SuperValu - Press Releases - October 19th, 2009