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Innovation in Stock Investing and Financial Planning

20 may 2008 - Features - Editor

Necessity is the mother of invention.

Creative instincts are honed during times of recession.

There is no time to start new R&D programs. Things with long gestation periods are best left to future executive teams. Investors expect tangible results before the next quarter. Innovation is relevant only for operations. Some companies try window dressing. Discard such stocks. Special deals rarely help brands in any lasting way. Customers will switch loyalties once the freebies run out. Your stock will be drained for nothing.

How can you spot effective innovation? Permanent cost restructuring is one approach that deserves your investment support. Look for:

  • cheaper ways to reach customers
  • renegotiated supplier contracts
  • stripped down brands at lower price points
  • better working capital management
  • mergers which aim to reduce net head count
  • import substitution with products from the home currency area
  • priority funding to keep investment projects on track
  • human resource initiatives to keep key people motivated
  • enhancement of brand tangible features with service upgrades
  • tightly specified action plans with personal responsibilities

There is one certain sign that innovation is at work on your stock. CEOs will have floods of new ideas to present. Do not expect them to be especially cheerful. Indeed, unbridled enthusiasm is a cause for suspicion during these lean times. However, they will be forthcoming with specifics. They will also commit to specific milestones on the way to recovery. Laments about the economy will be brief and factual.

2008 is a great year to separate the professionals from the crowd.

 


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