In my opinion, the answer is clear: yes – if the investment horizon is appropriate. The question is not whether to buy stocks, but rather what. In doing so, I am relying on high-quality stocks that have proven to be crisis-proof in the past and that have had little impact from inflation.
By high-quality stocks, I mean stocks of companies that have highly resilient business models that operate in different economic cycles. Who are not dependent on a specific short-term trend, which can also be prone to fluctuations, and who have a very high level of customer loyalty through their brand, awareness and benefits of their products. All of these factors are then often reflected in a very solid corporate balance sheet that allows high-quality firms to weather an economic downturn or even gain strength.
Companies that are referred to as high-quality companies have often been in the market for a long time and have achieved an excellent position during this time. A company with a healthy balance sheet can therefore use crises to maintain production capacity, keep employees on board, and perhaps even take over competitors that have encountered problems as a result of the crisis. You can even increase your market share in this way.
Such firms, in particular, can protect themselves against inflation. You can finance the increased production costs caused by inflation. In my opinion, the decisive advantage is that these price increases are more easily passed on to the end customer than companies whose products are (more) tradable due to the market power that often characterizes such companies.
The last reason you can mention is the “soft factor”. In uncertain times, investors tend to buy companies that they know or whose business model is understandable. Especially when prices are falling, an investor feels good to know the companies in the portfolio. The belief that in the future these companies will see better prices again and survive the crisis is greater than for smaller second-line stocks. As a result, the volatility of such stocks is often less.
The world-famous American producer of consumer goods Procter & Gamble is an example of such quality inventory. Established in 1837, the company has survived various crises, wars and economic fluctuations. Procter & Gamble is a great example of a company whose products are used and consumed in many business cycles. Brands such as Gilette, Pampers and Blend-a Med should be regularly on the shopping list in many homes. And even if the prices of these products increase due to inflation etc., they are not simply being replaced. Over the past ten years, Procter & Gamble has been able to continuously increase earnings per share, increase dividends and even raise the share price. Investors should see the current situation in the capital markets as an opportunity to use quality to make their portfolios resilient to the crisis and to be successful in the long term.
Christian Köpp is an authorized signatory and shareholder of Oberbanscheidt & Cie. Vermögensverwaltungsgesellschaft mbH in Kleve in Düsseldorf
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