The big success stories in the last few years have been related to commodities, real estate, and emerging markets. However, the real estate bubble bust, commodities prices are down by more than 50%, and there have been massive capital outflows from emerging markets. This leaves us searching for new opportunities.
The U.S. market is probably the best place to invest your money. Emerging markets will probably slow down in the upcoming quarters and many investors will continue to close their positions due to fear.
As for individual stocks, the most appealing companies are those with a good balance sheet and strong cash flow. A good balance sheet is important because the credit markets are likely to be tight in the upcoming years. The free cash flow factor is also tied to the tight credit markets. With less capital available, companies will have to use their free cash flow to invest in profitable projects and promote growth.
In regard to sectors, investors should look for companies that carry house staples and beverages. In general, investors must look for companies such as General Mills that produce necessary goods. We expect to see a frugal consumer in the upcoming quarters which means that you should stay away from companies that produce any type of luxury goods.
Overall, the U.S. looks like the safest place to put your money to work at the moment.
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