Becoming A Financial Player In Troubled Times

REASONS TO INVEST DURING THE RECESSION
Here’s a bit of evidence to suggest we may soon be in for a bullish ride:

Right now there is more being accumulated in money market fund assets as a factor of the S&P 500 Market Capitalization than at any point leading into the previous bull market periods dating back to 1981.

Investors are itching for a reason to jump back in. Although we may have a bit of road to travel before we hit bottom, it helps to know that the markets do a pretty good job of factoring negative news and perceived weaknesses into current market prices.

Instead of pushing the panic button and heading for the Wall Street exits, now is the time to start scoping some sexy stocks that are trading at valuations even investing icon, Warren Buffett, would like to sink his teeth into.

I’m talking about solid companies that will have no trouble surviving the recession and weathering the storm. And when the economy gets back on its feet, you better be prepared to hold onto the money rocket en route to Venus.

how to invest during the recession
OK, so either you have cash already sitting on the sidelines or you’re simply looking to allocate resources toward securities that may be dirty today, but sexy tomorrow. Here’s one way to play it:

The following is an initial list of criteria that you can use in conjunction with an investment screener during recessionary times to add significant arsenal to your investment portfolio:

Return on Equity (ROE)
In a nutshell, we’re looking at how well the company is using its earnings to generate more earnings. It reflects just how well management is at efficiently discovering solid investment opportunities. Specifically, we want to find stocks with an ROE greater than 10%.

Becoming a financial player in trouble times doesn't have to be hard with these tips from Oxbury Publishing

Quick Ratio
Think of this fundamental indicator as a measure of liquidity and the ability of a company to meet its short-term debt obligations. In other words, can they pay the bills and stay in business? Cash is king, and if you don’t have enough, it’s game over. The important thing to take away here is that a quick ratio over one is, generally speaking, quite good. And the higher this figure is, the stronger the company is financially.

Growth Rates
Markets are generally not shocked by news. When word of an impending event is leaked, the market in its efficient nature has a way of already pricing in these factors.

This leads us to growth rates. Current company growth rates are likely to be factored into the price of the stock, even next year’s growth to a certain extent. The key here is to see which direction the company is going and to find out just how robust that growth really is.

With that said, we’re looking for a company whose next year growth rate is higher than the current rate of growth. And next year’s growth had better be positive because in this type of environment, we don’t have time to watch a company try to dig itself out of a hole.

Price-to-Earnings Ratio
The P/E ratio is the price per share divided by the company’s annual earnings per share. The higher the number, the more investors are willing to pay for each unit of income.

Many investors believe that they can just size up a P/E ratio and pull the trigger if the number is low enough.
Not so fast.

Some ratios are low because either no one is willing to pay a high value per share and/or the stock resides in a low growth industry.

High P/E ratios can sometimes be justified -- especially if it’s an initial public offering (IPO), technology or high-flying internet stock like Google.

In order for this ratio to be effective, we have to compare it to the company’s peers within the industry itself.

In essence, we’re looking for a stock’s P/E to be lower than the industry average. This ensures that the earnings expectation bar is not set too high so as to give investors a reason to sell and punish the stock.

Profit Margin
It’s a basic measure of profitability, but again, we need to ensure that the company is in fact earning a profit. Again, we should probably dictate this percentage to at least 10%.

So, how do we put our criteria into a screener to do the dirty work for us? Simple:


Using powerful stock screeners
If you’ve ever used stock screeners before, you’d know that many of them out there are free, although vastly underdeveloped. However, MSN has developed a sophisticated and easy-to-use application that is actually somewhat difficult to find.

It’s called the MSN Deluxe Screener and you can find it by simply doing a Google search for this term.

Following the download, you’ll be taken to a window that will allow you to input your investment criteria. Make sure you bookmark this page.

When all is said and done, you can press “Run Search” and watch as the filter returns stocks that fit the profile along with all the data necessary to make a good comparative analysis.

Before taking the plunge on my word alone, be sure to do your own due diligence.

Good Investing,