“We experienced in the last three months one of the nicest rallies in Wall Street history, and now we’re seeing the reasons why,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts. “Texas Instruments and others are bumping up guidance nicely, and many companies that reported very negative consumer reactions are pulling that guidance back a bit.” Cabot manages $400 million.
The S&P 500’s rebound following its worst year since the Great Depression came after the government and Federal Reserve pledged $12.8 trillion to end the first global recession since World War II. The measure trades at about 14.8 times the earnings of its companies, near the seven-month high of 15.2 reached in May while below the 19.9 average over the last decade. [Via Bloomberg]
Cash flow is a major concern for most companies during a recession, and reductions in cash-flow can pose a major risk to many company's financial health. There a few types (four are listed below) of companies that seem to be "recession proof" and this article at Investopedia helps explain...
"Economic downturns pose financial problems for many companies, but there are companies that continue to generate revenue despite adverse market conditions. If a company (1) serves an insulated market, (2) provides critical repair and maintenance services or sells a consumable product, its business is unlikely to plummet, even in the worst market conditions. Additionally, (3) products or services mandated by the government offer good opportunities for stable business. Finally, companies that (4) provide a proprietary or patented product or service may be more resilient than other companies providing cookie-cutter offerings. Even during recession, money continues to flow in an economy. There are profitable companies out there - it is up to smart investors to find them. (For further reading, take a look at Industries That Thrive On Recession)"
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