Posted on Wednesday, 8th July 2009 by admin
The US market is going through one of its worst recession ever and some people are even talking about a market depression. So which stocks to buy in recession? Instead of giving you a list of stocks to buy (which I provide once in a while anyway 
), I will outline so important key point to look at when you are doing your stock hunt
Cash is king
Nothing is more important than cash during though time. Why? Because sales will usually go down, banks are less likely to lend money to companies and competition is stronger than ever since everybody is battling for the only slice of the pie left by the economic crunch. When looking at financial statements, you must look at the short term assets (cash, money market funds, receivables, etc.). While having a lot of liquidity is a good thing, you also need to look at the financial obligation of the company you are about to buy. If their liquidity ratios are good, then you have a solid company that will be able to not only survive in this hostile environment but probably grow even stronger out of it.
#1 Cash will enable the company to meet their financial obligations and maintain a good credit. Therefore, it will be easier for this company to get more financing if they need to do any projects.
#2 Speaking of which, cash will enable the company to buy more performing equipment and invest in R&D. This will obviously enable the company of remaining competitive and probably increase its profitability once the economy start going up again.
#3 If they have a lot of cash, they will also be able to maintain their best element in place and probably recruit the best employees in the industry. Most workers want to work for a well establish company that will last. They seek stability, same for the shareholders
There are many other factors to consider when buying stocks in a recession. Cash was the first of them. During the next months, I will add more key factor to buy great stocks in 2009. Stay tuned!
Posted in Best Stocks in 2009 | Comments (2)
July 11th, 2009 at 11:55 am
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