If the current unrest in the Middle East begins to wane, Vadim Zlotnikov, a strategist at BernsteinResearch, says he would choose stocks like Mosaic (MOS), Las Vegas Sands (LVS), State Street (STT), Cummins (CMI), Alcoa (AA) and Cameco (CCJ).
Assuming unrest continues, he would choose plays such as Chevron (CVX) and Conoco (COP), Bristol Myers (BMY), Sony (SNE) and DirecTV (DTV).
Big increases in the VIX, also known as the fear index, tend to weigh especially heavily on companies whose earnings prospects are tied closely to economic growth. These so-called procyclical stocks won't look like a good bet if the unrest in Libya intensifies and the New York price of oil soars to, say, $120 a barrel.
But Zlotnikov says he doesn't expect that to happen – which should be good news for the global economy and companies whose profits are strongly tied to global growth.
"While potential for spread of unrest to other major oil producing countries is clearly possible, this is not our base case as governments of oil-producing countries will seek to mitigate unrest through wage and other concessions," he writes. "Under the scenario of sustainable $100 oil during 2011, the adverse economic impact should be contained and a 'normal' decline in VIX should ensue during the next couple of weeks."
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