Three stalwarts for stormy times

Professional investor Nick Ford expects market turbulence. But he focuses on stocks that he thinks are well positioned to withstand difficult times. Here, he describes three of his top picks.

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Nick Ford, investment director, global developed markets, Scottish Widows Investment Partnership.

While we expect further equity-market turbulence, our investment research process at ScottishWidows Investment Partnership focuses on individual stocks that we think are well positioned to withstand difficult times. Here are some of our top picks.

IBM (NYSE:IBM) has traditionally been seen as the monolith of the IT world. Yet the company has been going through something of a transformation, with the aim of updating its image and focusing on more profitable areas of business. It has set itself ambitious targets of generating earnings per share (EPS) of $11 by 2010, half of which will come from strong growth in its software division. In addition, IBM has recently launched a new mainframe system called 'z10', which should help drive revenues. The company has also seen something of a renaissance in demand for its mainframe computers, thanks to the cost advantages they offer over servers in terms of labour and power.

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Finally, IBM is one of several American companies eyeing opportunities in developing markets where infrastructure spending is high. Demand is escalating for proper IT systems and IBM has positioned itself firmly as the leading supplier to these markets. Overall, the company's emerging markets business is growing faster, and at a higher profit margin, than in its established markets.

O'Reilly Automotive (NASDAQ:ORLY), on the other hand, is using its strong franchise on the east coast of America to move from being a strong regional chain into becoming a national leader.

America's auto parts retail industry is fragmented, with the large chains making up less than a quarter of the market. This state of affairs has allowed O'Reilly to grow its store base by 13% annually over the last five years, and we expect double-digit growth to continue over the next five years.

Although not immune from a slowdown, demand for auto parts is relatively steady because Americans cannot live without their cars and, although some maintenance costs can be deferred, most can't be put off forever.

At the beginning of April, O'Reilly announced a bid for a competitor, CSK Auto. The deal will increase O'Reilly's store base by more than 70% and add more than 20% to EPS from 2010, implying a significant share price rise over the next two years.

My final tip, the Alberto-Culver Company (NYSE:ACV), is a multi-billion-dollar corporation distributing a broad range of branded hair and skincare products worldwide. The firm has an experienced management team armed with a strategy of acquiring businesses and brands with long-term growth potential.

Alberto-Culver has three main big haircare brands: value-oriented Alberto VO5; mid-tier TRESemme; and the number-one salon brand in the mass market, Nexxus. Overall, Alberto-Culver is the number-four player in the American haircare market. Recently, it spun-off its beauty supply distribution division, Sally Beauty, which should help streamline the firm; and there is ample room to grow as new products are developed and launched.