In his recent “Talk Back” episode, Rich Karlgaard, publisher of Forbes Magazine, talks about how profit can still be made in economic dire straits. Karlgaard explains that in today’s bearish market, more and more stock investors need to “forget about broad indexes and become very good at individual stock selection.”
Citing many of his own discussions with Jim Jubak of MSN Money, Barry Ritzholtz of “The Big Picture”, and one of his own Forbes contributor, Vitaliy Katsenelson, Rich compares the three skeptics’ views on the low stock prices in the current market with his own optimist views.
Though despite his bearish position, Jubak also acknowledges new opportunities in investing within a few companies that fall under these 3 criterion:
”1. Companies with flexible production and low fixed cost
2. Companies with free cash flow that covers debt payments and is large enough to finance the company’s growth (cash flow is king)
3. Companies whose customers have the cash or credit to keep buying”
Karlgaard also reminds investors to go for the big shots and invest in major players in the global economy with “lots of cash and little debt on the balance sheet.”
The two industries which present great investment opportunities as noted by Karlgaard as well are “healthcare and smartphones.”
Of course, if you do your research well enough, I think history will look back at this as one of the greatest buying opportunities.
Think smart, your children will thank you.
Key Themes Behind This Trend
- Flexible Production and Low Fixed Cost
- Identify companies with the ability to adapt production and maintain low fixed costs, which can lead to increased profitability even during economic downturns.
- Cash Flow Is King
- Focus on companies with strong cash flow that can cover debt payments and support future growth, as cash flow stability is essential for long-term success.
- Customers with Buying Power
- Invest in companies whose customers have the financial capacity to continue purchasing products or services, ensuring sustainable revenue streams.
Where This Applies
- Healthcare
- Explore investment opportunities in the healthcare sector, which offers potential for growth and innovation amidst evolving market demands.
- Smartphones
- Consider investing in the smartphone industry due to its continuous technological advancements and expanding market reach globally.
- Research and Analysis
- Engage in thorough research and analysis to identify promising investment opportunities and maximize returns in the current market conditions.
