Austerity is a necessary but inadequate response to a downturn. You cannot remain invested in a stock of a corporation that does not protect profitability. Recession and inflation demand fresh cost-effectiveness drives. However, reducing the number of employees does not secure any future for a business. Stock investors must look beyond 2008 to find the best stocks. Day traders must continue to dwell in the short-term, but the best portfolios will favor companies that are poised for profitable growth.
Production capacities cannot be generated overnight. New products and services are not on tap. Inorganic growth requires painstaking due diligence. Every significant new business development will have a long gestation period. Strategic planning must stay on course even in the worst of times. Many investors harangue management teams about what has happened during the last quarter. More important questions relate to whether the 5-year plan is on schedule.
Business astrology is more reliable than the celestial kind. It is possible to extrapolate some trends, and to spot discontinuities in them as well. Modeling is another business management process that we can use to attach probabilities to future scenarios. The serious stock investor can use systems to find the best values in the ruins of the uncertain 2008 stock exchange environment. Here are three steps that you can take to estimate how bright the distant horizons of your stocks are:
1. Does the management have specific plans to generate cash inflows and to grow the business in the second decade of this millennium?
2. Have you checked all the scenarios for the future that the company has developed?
3. Are action plans for the rest of 2008 consistent with the long-term vision?
Take a fresh look at your portfolio now. Make sure that you are in great shape for the next upswing in the business cycle.
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