![]() One of the stand out quality metrics for Halma is its 5-year Return on Capital Employed, which is a solid 14.8%. They also have strong and improving financial histories with no signs of accountancy or bankruptcy risk. These kinds of firms are stable, growing and often have accelerating sales and earnings. When it comes to stock analysis, company quality tends to show up in high profitability and strong industry-leading margins. GET MORE DATA-DRIVEN INSIGHTS INTO LON:HLMA » Why quality stocks pay off Likewise, strong momentum in price and earnings is a pointer to stocks with positive trends that have the potential to continue. And that means looking for opportunities to make investments while others are concerned about a falling share prices.Decades of research shows that good quality stocks are more likely to be resilient, cash-generating businesses that can compound investment returns over time. Over time, however, I think that following Buffett’s advice and being greedy when others are fearful will pay off for me. Stocks haven’t been falling for no reason and a recession might bring down their profits, lowering shareholder returns as a result. I’ve been using recession concerns to buy shares at a 44% discount to the price this time last year.Įach of these stocks has risk associated with it. Games Workshop is able to generate impressive cash flows from relatively few tangible assets. Lastly, I’ve been adding shares in a company whose strong intangible assets impress me. I see this as an opportunity for me to add shares in a business that is well protected from disruptive competitors. The stock is trading 18% lower than it was 12 months ago. With the stock down around 15% over the last year, I’ve been buying shares for my portfolio.Īnother example is Experian. I’ve been an admirer of the company’s dominant market position, impressive capital structure, and low capital expenditures for some time. To find the best opportunities, I’m looking at shares that others are most afraid of. There’s less fear around National Grid stock than there is around Halma. National Grid, for example, has lost only 3.5% of its share price since the beginning of January. Some stocks – such as Halma – have fallen by around 40% since the start of 2022 (Halma’s down about 30% in the last 12 months). Greedĭeclines in the stock market have been uneven. And I intend to follow Buffett’s instruction and be greedy. This tells me that there’s fear in the stock market. But instead of taking advantage of the discounted valuations, investors seem to be holding off buying in case the stock has further to fall. Today, the stock is much cheaper, with the share price under $176. A year ago, the stock was trading at around $497/share and investors were enthusiastically buying shares. One of the best examples of this is Netflix. Their concern is that if they buy shares in a company today, they might find that their investment is down 10%, 15%, or 20% next month. The prospect of more rate increases or even a recession is continuing to weigh on stocks.Īs stocks fall, market participants seem to be less and less willing to invest. The result has been a decline in stock markets.Īt the moment, investors are anxiously monitoring the economic situation. Share prices have been coming down as central banks attempt to bring inflation under control by increasing interest rates. Both the FTSE 350 and the S&P 500 are significantly lower than they were at the start of the year. I think that investors are fearful at the moment. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today! But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. Inflation is out of control, and people are running scared.
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