7 investments that beat stocks now

Only the most bearish market analysts expect stocks to return to their March 2009 lows anytime soon.

The recession was recently declared over as of June 2009, and there’s less gloom and doom on Wall Street now that the economy is eking out a bit of growth.

So, does this mean it’s OK to sound the all-clear for the stock market? Hardly.

The economy may be improving, but stocks are, at best, moving sideways. When you consider that a host of investments are trouncing equities, it may make sense to sell stocks and move at least part of your nest egg elsewhere.

Here are seven investments outperforming stocks. Some are obvious, and some are a bit unconventional. But all are worth considering in these uncertain times.

1. Gold

Gold bugs can get a bad rap because a handful of gold investors are convinced that the dollar will disappear as a solvent currency and we’ll all go back to bartering sheep. But it’s hard to knock gold’s performance over the last year or the past decade. Gold prices are up about 25% in the past two months, far outpacing the roughly 4% gain for the Standard & Poor’s 500 Index ($INX) in the period.

A decade ago, an ounce of gold cost $300, less than 25% of what it fetches today. An investment of $300 in a mutual fund keyed to the S&P 500 a decade ago would be worth about $240 today. Don’t care for messing with heavy coins? The SPDR Gold Shares (GLD) exchange-traded fund was launched in November 2004, and initial investors who have held on to their shares are sitting on a hefty 170% return.

2. A self-storage business

There are risks, of course. High vacancy rates, theft and property damage can erode profits. Also, a self-storage business is illiquid and could take time to sell once you’re ready to invest elsewhere or retire.

But done right, all you have to do is deliver the keys and pick up the monthly checks. And business is booming as families that lose their homes to foreclosure move into smaller lodgings and put some of their belongings into storage.

3. Cash

The stock market has been flat this year, but the ride has been volatile. Some investors have opted to move money out of the market and into their savings accounts.

Here’s another compelling argument for cash: deflation. If you truly believe in this scenario, then go to cash, because it will “appreciate” under your mattress. Think of it this way: If prices for cars, houses and other goods decline 3%, you’ve just “made” 3%, thanks to your increased purchasing power.

Even without deflation, if you add a few percentage points of interest by buying a certificate of deposit, you’re at least keeping your head above water.

Pimco founder Bill Gross recently said, “I think most asset classes are attractive but will only provide 4% to 5% returns going forward.” Cash may have trouble matching that, but at least there are no fees to pay, and you can’t beat the liquidity.

Of course, if inflation returns, the cash under your mattress will be losing its purchasing power.

4. Lease your land

Real-estate prices are soft, so selling extra acreage now may not be wise. But if you live near an area of spotty cellular coverage or your family plot is above a natural-gas deposit, you can put the land to profitable work.

Cell phone tower leases are picking up as major carriers such as Verizon Communications (VZ, news, msgs) and AT&T (T, news, msgs) upgrade their networks. Owners of well-situated areas can lease land or roof space to wireless companies for a few hundred dollars to a few thousand dollars a month.

The same goes for oil and natural-gas deposits. Depending on the mineral resource, annual rentals can range from a few dozen dollars to hundreds of dollars per acre. And don’t think you need to live in Texas to tap in; rural areas of New York and Pennsylvania are rich with natural-gas reserves.

The downside? For one, you have to get used to some new structures on your land. But it’s hard to deny the appeal of just sitting there and letting your idle land work for you.

5. 10-year Treasury notes

Investors who bought Treasurys with a 10-year maturity a decade ago have done very well. Interest rates in September 2000 were about 5.5%. The Dow Jones Industrial Average ($INDU) over that period is down about 2%.

Obviously, rates are much lower now, and returns look anemic for current investors. But if the market moves sideways or dips further, a 3% annual return may not look too shabby. It’s also worth noting that as recently as July 2007 investors could get a yield of 5% on 10-year Treasury notes.

Smart money was buying bonds before the financial crisis. In May, before a sharp contraction on Wall Street, savers could have locked in nearly 4% with 10-year Treasurys. That may prove to be a good long-term return. But yields today are closer to 2.5%, so stocks would have to stay weak for the next decade — and interest rates remain low — for 10-year Treasurys to be a good bet today.

6. Build America Bonds

The American Recovery and Reinvestment Act of 2009, known colloquially as “the stimulus,” established Build America Bonds. The goal was to reduce municipal bond-borrowing costs with federal subsidies. The first issues came out in April 2009, right after the market lows, and obviously didn’t keep pace with Wall Street’s surge in the spring and summer of that year. But over the long term they may prove wise investments.

Among the initial Build America Bond issues was $250 million for the University of Virginia, with a 30-year maturity, a glowing triple-A grade from all three major rating agencies and a plump yield of 6.22%. Not bad, though the market’s roughly 30% gain since April of last year has outpaced the bonds’ return.