Question: The market keeps crashing. People are asking what is the shopping list, for stocks, what should they be buying during this market crash?
Answer: We are having a what you call bear run (e.g. when the stock market is declining)? The stocks market is declining because of recession expectation.
One advice I can give you is to choose stocks which you know will survive the recession. Do not choose those that has a low chance of survival.
There are two approaches on how to go about buying such stocks. One approach is a more objective. The other is more subjective.
The objective approach of picking stocks that is going to do well after this recession period is to choose a company that has what you call a “positive free cash flow.” Positive free cash flow, are simply cash flow coming into the company after setting aside “capital expenditure.” Capital expenditure means money that is needed to buy equipment or upgrading their manufacturing plant. In addition, choose a company that has consistent free cash flow. Another objective criterion is to choose a company that has low debt so that it will not be affected by the raising interest rate.
However, you will also need to look at the subjective element. Ask yourself, in 5 to 10 years’ time, will the company still be there? Is it able to compete, and do better than its competition? Ask yourself is there something unique of the company that it will stand out against its competition?
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