What are the best stocks to invest in as the world still struggles to wrest itself from the effects of a worldwide recession? Investing on companies with cash is always a safe bet during troubled economic times. Consumer products stocks typically make money during both good times and bad. Then again cyclical stocks always take a beating during a recession and commonly pop back up as the economy rights itself. At any given time there are a number of best stocks to invest in based upon a combination of intrinsic value and a margin of safety. The list changes with the times. Yesterday’s list of best stocks to invest in included stocks with low P/E ratios and promising products. Many such stocks make money and are bid up by the market which discounts forward looking earnings.
Thus the winners from yesterday’s list of best stocks to invest in are now stocks with high P/E ratios and not such good investments as before. There are some stocks that will prosper in good times and in bad. Companies with great new ideas, new technology, or new and successful management practices often outstrip the competition. Investing in innovation and investing in growing companies with entirely new type of products can be profitable in any economy. The problem for the investor is often how to anticipate which stocks will grow and to do so before the rest of the market catches on. To do this an investor needs to watch the broader news and especially to watch for new developments in areas where he has expertise. An example of missed opportunity was noted by the investment guru Peter Lynch.
In the 1970’s a popular investment for many professionals was buying and leasing railroad boxcars. During this same period scientists invented the first effective anti-ulcer drug, Tagamet. Physicians were prescribing this new wonder drug right and left but still investing in boxcars and not Smith Kline and French stock, which skyrocketed with monster sales of the new drug. A good rule of thumb when looking for the best stocks to invest in is for the investor to look at stocks in his area of expertise first of all. When scientists further understand the human genome there is a good chance that they will be able to implant stem cells to replace cartilage in arthritic knees and hips, implant functioning pancreas cells to cure diabetes, and implant new, functioning brain cells to cure Parkinson’s Disease or Alzheimer’s disease. Any of these advancements in medical science will open the door to life changing and profitable products. By staying abreast of research in these fields and knowing which companies are likely to product profitable products it will be possible to know which the best stocks to invest in for medical advances.