Picking good stocks is challenging at any time. But these days, inves-tors must be wary of companies that are vulnerable to higher-for-longer inflation, as well as lingering supply-chain disruptions, rising interest rates and the scary geopolitical situation in eastern Europe.
Some companies hold up better than others in tough times. Firms that lead their market or industry, for example, typically have strong pricing power— think Apple or Nike. These types of companies can pass on higher wages and material costs to customers by raising prices for goods or services without seeing much slip in demand. Other firms fortify their results by controlling costs (Johnson & Johnson has proved adept at this in years past). Still others have businesses that are simply less sensitive to rising material and labor costs, or even supply-chain issues, because of the services or goods they sell (Netflix, say, or Airbnb).
One way to find companies with those attributes is to scrutinize profit margins. Why not profits alone? A company’s bottom line—its net income or profit—matters, of course. But profit margins can show how efficiently a company manages its operations and costs over time, in good and bad periods. Well-managed firms can maintain or expand profit margins through changing economic and market conditions. Often, these companies also have strong balance sheets and a steady stream of free cash flow (cash profits left after expenses to maintain or expand the business). “These companies are well placed to do well in different economic environments,” says Ian Mortimer, portfolio manager of SmartETFs Dividend Builder ETF.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
MAKING A DIFFERENCE IN THE LIVES OF DISABLED VETERANS
He suffered grave injuries in the line of duty. Now he helps other veterans who have disabilities.
DO YOU NEED UMBRELLA INSURANCE?
A policy can protect you from financially devastating events.
Navigating Finances as a Blended Family
Money matters can get complicated when two families unite. Planning is key.
BREAKING UP WITH YOUR BROKER
Be aware of these challenges when you move your money to a new home.
CHOOSE A MEDICARE PLAN THAT'S RIGHT FOR YOU
Consider your health care needs over the long term as you weigh costs and coverage.
Keep Faith in These Stocks
IN 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random.
OUR ESG PICKS ARE THRIVING
Despite an ongoing backlash, our favorite stocks and funds focused on environmental, social and corporate governance issues had a good year overall.
MONEY MANNERS FOR THE MODERN AGE
The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.
ELECTION 2024: POLITICS AND YOUR PORTFOLIO
Who wins the White House matters—but only at the margins when it comes to your investments.
YOUR GUIDE TO OPEN ENROLLMENT
With health care costs on the rise, it’s critical to select a plan that fits your needs at the right price.