Finding Opportunities in Times of Economic Uncertainties

Global Markets have been experiencing volatility in the past few months because of the Greek financial debt issue and the overall European financial crisis. A great part of the investing community continue to pull their money out of the market on fears of recession. However, according to some experts from Knightsbridge Advisors,  it is best to make stock investments when the market is highly uncertain and recession is crawling along the edges.

In the course of financial history, it is during recession when some of the greatest investments were made by the world’s wealthiest investors. At the end of poor economic condition or recession, these same investors were the ones to reap the gain after recovery and growth starts its phase in the financial cycle.

Taking from these stories, it is highly advisable for investors not to cash in their remaining stocks or hide their money under their mattresses during time of economic slowdown or full-blown recession,. Instead, it is during this time that they should review financial history’s lessons; and then make necessary adjustments on long-term investment strategy.

Having said that, here are some tips that investors can use in picking stocks to take advantage of the rare investment opportunity during times of economic uncertainty and market volatility:

#1Look for companies that have double or triple digit growth. This growth is in terms of profit. In spite of other drawbacks, a company with massive growth will not be greatly affected by the economic slowdown.

#2 Pick stocks that are undervalued relative to the company’s intrinsic value. The best known measure if a stock is undervalued is through looking at company’s P/E ratio. Companies with low debt and historically has strong earnings are also the ones to look out for.

#3 Select companies that have economic independence, that is, companies that are not vulnerable to the swings of the U.S. economy. These companies, when looking at their financial statements, still have growing revenues even during the last recession or where profit rose given that sales dropped slightly.

#4 Opt for defensive stocks that focus on food, healthcare and utilities. These companies thrive especially during economic uncertainties because they provide the basic necessities to people; therefore, they continue to get more demand for their products/services, earn revenue and make a high profit.



#5 Choose companies that offer a high dividend yield. Companies usually declare if they provide dividend payouts in their financial statements. If historically a company is paying generous amount of dividend to its shareholders, then that company is a good pick. Reason behind it is because these companies provide income even in difficult times.