How to Find Good Stocks That Can Survive 2008 Market Crash

Find Good Stocks
For 2008 Possible Stock Market Crash

To find good stocks that are able to survive stock market crash is really tough. However, these simple financial ratios can help you to discover these tough stocks.

Earnings per Employee

You can calculate the staff productivity by dividing the total earnings by the number of staffs. As different industries have different ratios, you should compare staffs’ ability to bring value to the company in the same field. Compare yourself a bank with $12k profits per staff with another bank of $98k profits per staff, I bet you can notice the difference.

Good employees maintain the business operation, but great workers will sustain the business growth. And in stock investing, earnings growth does matter, especially during recession. Though times never last, but tough people do.

Return on Asset

ROA can be calculated by dividing the net profits by the number of assets that the company owns. It indicates how efficient the management is in turning the assets into profits. Compare with other stocks on how they do is something you should consider. Lower ROA can be attributed to not having enough expertise to manage the assets or not having the right assets in the first place.

During stock market crash, companies with the lowest return on asset (ROA) are prone to be acquired by stronger companies. Unfortunately, not all low ROA stocks hold the value they want in the eye of larger companies. Therefore, better avoid this type of stocks.

Liquidity Ratio

Liquidity ratio measures if the stock is able to meet the short term obligations. It can be calculated as current or quick ratio. Either way, it is about the liquid asset over its current liabilities. This ratio is critical during recession as the interest rate will increase substantially that time. Although Federal Reserve maintains the interest rate recently, there is no guarantee it will be the same in 2008.

Recently, I noticed some good companies holding substantial liquid assets like never before. This indicates the stocks are preparing themselves of any possibilities of higher interest rates next year, or having enough cash to buy profitable asset at cheaper price in 2008.

I myself not sure what 2008 has to offer. But what i do know is, I'll find good stocks that can only grow stronger after the market crash and be prepared to buy more shares when they are Grand Sale in stock market. I believe, you should do the same too!

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