Sunday, October 30, 2011

Sure Hit Investments

Even in the most volatile of economic environments, there are still good investments to be had. And if there is anything that the recent recession and the current debt crisis of the United States and Europe have taught us, it is that certain companies are sometimes better than savings accounts when it comes to preserving and growing capital at a rate that overcomes inflation.

Below are some of the types of companies that are sure things, no matter the economy that surrounds it.

- The Brand Parents.

Though the wants of people change frequently with their economic situation, their needs never do. Companies that are positioned to take advantage of both normal and Giffen goods can hedge their bets in the worst of economies. Parent companies which own a lot of brands such as General Electric, Johnson & Johnson, Yum! Brands and other businesses such as these are positioned with Giffen good brands for bad times, which holds up profits and keeps the company from swinging any farther than the market does.

More importantly to the long term investor, companies like this often keep their dividends during rough economic times. If they do not, you can rest assured that they are investing the extra capital back into the company. This is the time to look for companies with the capital for acquisitions and good research and development, because when the economy bounces back, they will be in an even better position than they were before.

- Commodities.

Companies that deal with things that people will need no matter what are great bets in both good and bad economic times. Things like oil, gold, rice, bread, wheat - the farther back you can go in the production cycle, the safer you usually are. These companies can also act as hedges against inflation, because the basket of goods that inflation is based on contains the products that these companies make. So just like a TIP bond, if inflation drives up prices, they will also drive up the prices of the commodities, but demand will not go down as much as a luxury product, because the product is consumed based on need.

For the long term investor, it is essential to bet on the commodity itself or on the base company that manufactures the product, and not any derivative thereof. For instance, investing in gold is much better than investing in a gold mining company, whose profits depend on how much of the commodity that they actually find. You can also include businesses which specialize in delivery of these goods to the public, like Wal Mart.

- Blue Chips with Intellectual Property.

Products such as those made by McDonalds and Coke have a proprietary lock on the market, both in intellectual property and in brand recognition. It doesn't even matter if someone makes a product that tastes like Coke, people will still buy Coke. These types of businesses are usually invested in for the long term dividends.

This post was contributed by Kelly Austin from Higher Salary. Visit her site for information on the average pharmacy technician salary and guides to other popular careers.

No comments:

Post a Comment