Officially, we are in a bear market and therefore time to adjust your portfolio. Look over your portfolio now and get rid of the bad apples in your basket. The key to becoming a better investor is to master the ability to adjust to the times. The game has changed and we have a different environment now. The senseless money printing has slowed down, interest rates are on the rise and inflation is not under control.
Therefore, the market will focus on these 4 factors for success. And this is what you should be looking for:
1. Growing revenues
Now companies have to show that they can grow revenues or at least not shrink them in a more normalized market.
2. Positive cash flow
Earnings are important, but so is cash flow. Companies must produce enough cash to pay their bills without having to go to the equity or debt markets.
3. Earnings or a solid path to earnings
Companies now must demonstrate they can make money over a period of time.
4. Valuations
Valuations must be in line with historical industry, market and company norms. Outsized valuations like 20 or even 50 times sales won’t be accepted anymore.
Sven Franssen