If You’re Afraid To Invest, This Tip Can Help You Divide The Good Stocks From The Bad
Thursday, January 22, 2009
by Marc Lichtenfeld, Senior Analyst & Healthcare Specialist, Smart Profits Report
And when I go back to the house
I hear the woman’s mouth
Preaching and a crying,
Tell me that I’m lying ‘bout a job
That I never could find
- The Silouhettes
Hopefully, the woman described in the Silouhettes’ 1958 hit song, “Get A Job” would be a bit more understanding today.
In 2009 America, it’s downright difficult just to hang onto a job, never mind find a new one.
We saw more evidence of that today when Microsoft (Nasdaq: MSFT), a company renowned for its stability, announced it will cut 5,000 jobs, in what is believed to be the first layoffs in the company’s history. Shares tanked as a result.
Microsoft’s news comes alongside a Labor Department report today that said there were 589,000 initial jobless claims this week, 54,000 more than projected. No surprise there. It seems the jobless numbers come in higher than expected every week. Some companies however, seem oblivious to the current situation such as Lowe’s (NYSE: LOW), as we discussed in our previous issue, Will Someone Tell Lowe’s That We’re In A Recession?
On July 9, 2008, Republican politician Phil Gramm famously ignited the presidential campaign by declaring that the U.S. economy was not in recession: “You’ve heard of mental depression; this is a mental recession.”
While I disagree with Gramm’s view, there is no doubt that fear plays a part. If people don’t feel confident that they’ll have a job next month, they’re going to cut back on discretionary spending, which has a ripple effect on the economy.
The kind of fear will continue to permeate the stock market, too. But despite what you might hear to the contrary, there is a way to combat it…
Cash Is King
While the market is a forward-looking mechanism, I don’t expect to see any kind of meaningful improvement for stocks until these massive rounds of layoffs decelerate at the very least.
Meantime, businesses and consumers alike will continue to employ the same tactic: Cutting back spending in order to conserve cash. And that’s just what investors want to see from companies.
The “cash is king” idea dominated proceedings at the JP Morgan Healthcare Conference that I attended in San Francisco last week. All the 6,000 institutional investors and venture capitalists could talk about was balance sheets.
Companies with high cash and low debt were the darlings of the dance, while those who need to raise capital over the next year were about as popular as Caroline Kennedy at a meeting of the Rush Limbaugh fan club.
Here’s what I took away from my discussions with these movers and shakers…
Pay Attention To The “Risk-Cash” Relationship
Contrary to the overwhelming doom and gloom, there are actually companies that will attract institutional dollars in the coming months.
And while you’d think safer investments would be the popular choice, portfolio managers are willing to take on risk - just as long as it’s not the risk of running out of the cash needed to operate the business.
This is similar to the approach I take in the Xcelerated Profits Report newsletter. I zero in on companies that have drugs in late-stage clinical trials. While there’s a better chance of success at this stage (i.e. getting the drug approved by the FDA), these stocks obviously still have some risk to them. If the drug fails, the stock will fall. If the drug is successful, the share price should consequently rise significantly.
For more information on Xcelerated Profits Report, please click here:
An Investment Tip For 2009
Right now, fund managers are still willing to accept this kind of risk, as long as the company has enough cash to remain a going concern. In fact, these kinds of investments are quite appealing because they offer the opportunity to do two things…
1. Chalk up significant gains.
2. To beat their industry benchmarks, which is often the basis for how fund managers are compensated.
A tip for 2009: Avoid balance sheet risk in 2009, but don’t run scared from all risk.
Remember… there will be some big winners in 2009, as there are a lot of investors sitting on the sidelines, just waiting to pile their money into the market at the slightest hint of positive news both for individual companies and on a macro scale, too. And we’re going to need all the winners we can get in 2009.
Marc Lichtenfeld
Upcoming Investment Conferences
THE OXFORD CLUB’S PRIVATE WEALTH SUMMIT
APRIL 28-29, 2009
THE WINDSOR COURT HOTEL, NEW ORLEANS, LA
Co-sponsored by Mt. Vernon Research and MoneyMorning.com
We invite you to join us for our new, intensive Oxford Club Private Wealth Summit at the AAA Four Diamond winning Windsor Court Hotel in New Orleans, LA on April 28 and 29, 2009.
Join us to experience in-depth strategy sessions that will allow you to prosper in any market disruption in the year ahead. Among the speakers: Mt.Vernon Research Investment Director Karim Rahemtulla… Oxford Club Investment Director Alexander Green… Money Map Report Editor and Trigger Event Specialist Shah Gilani, and Oxford Club Associate Investment Director Louis Basenese.
And for the first time ever, each of our expert Investment Directors will teach you their strategies point by point. You’ll walk away with the knowledge needed to apply these techniques in your own investing.
They’ll reveal which stocks are set to recover - and even explode - over the coming year, as well as how to maneuver around the daunting economic news coming from Wall Street and beyond.
But it won’t be all work and no play - not in New Orleans! And our event just happens to coincide with the world famous Jazz Festival.
This is an exclusive event, so we must limit the seminar to just 50 attendees. If you’re interested in joining us, call our conference manager Christina Olson today to reserve your space: 800.992.0205 or 410.223.2689 or colson@oxfordclub.com. You can also check out the website HERE. DON’T FORGET TO ASK FOR YOUR $300 EARLY BIRD DISCOUNT.
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