Investor’s of the New Year are looking for stocks that pose good potential for growth and minimal risk. Companies who present solid balance sheets, pragmatic growth strategies and well-managed plans are most likely to gain the favour of 2010’s mindful, tactical investor.
Investors should be looking for companies with a strong potential to generate cash flow and with interest-swallowing debt loads well in check.
Some investment advisors recommend to take intangible assets and goodwill completely out of the balance sheet equation to get a clearer scope of the true healthiness of a company. Others suggest selecting balance sheets showing very little leverage, particularly where U.S. businesses are concerned, unless the business is in extremely prominent standing and producing something that is in large consumer demand.
If predictions are accurate that consumer spending, especially in the U.S., is going down, companies that rely on selling to the U.S. may be in trouble, that is if they are not selling something that will sell regardless of a change in spending habits; namely old faithful cap-companies.
If inflation is indeed going to rise, look for a company that can raise the cost of its product or services along with it, without risking losing its market. This year, companies that sell to a wide range of clients internationally may be better bets. Emerging markets are seeing hiking consumer consumption.
At the same time, you want to purchase stocks at the right time and price. If you are purchasing stocks in a company within a cyclical sector, you want to purchase below value, not at an inflated value because that particular sector, company or stock is hot at current.
Lastly, an often good time to purchase safely is when a viable company has been hit by troubles that are proving to be in remedy. Their stock values may be temporarily devalued, but have a strong potential to grow again.