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Making the most of a low-growth environment: Part 2

It's tough to develop an investment plan in a low-growth environment, but there are ways to accomplish it.

It’s tough to develop an investment plan in a low-growth environment, but there are ways to accomplish it.

In our last installment in this series, we discussed how investors may need to start adapting to a prolonged low-growth environment, as certain signs in the global economy indicate that these characteristics may persist for some time. It's incumbent on investors, therefore, to take prudent steps to develop a portfolio strategy that works in spite of tepid economic expansion.

Some financial experts suggest that identifying which sectors tend to perform well despite adverse investing conditions is a good method to figure out a way forward. This means thinking about what types of products and services people will always need and establishing a means to keep risk in check, as volatility can crop up in just about any industry due to a variety of divergent factors.

According to two independent studies published on Seeking Alpha, an online finance analytics community, utility companies have been faring well in spite of both seasonal and structural problems affecting that sector. Both papers identified CMS Energy Corp. (CMS) as a potential source of income for risk-averse investors. With a customer base of over 6 million Americans throughout the state of Michigan, the company recently announced that its bonds have been officially designated as investment grade by both Moody's and Standard & Poor's. The authors also noted that it treats its customers well, focusing on non-fee-based sources of revenue to maintain satisfactory operations.

These strengths highlight what qualities in a utility company investors should look for. A pro-active management, a strong portfolio of clients and an effort to maintain a level operational cost margin are all signs of a well-run utility.

Other groups, such as DTE Energy Co. (DTE) – which also operates in Michigan – and Oregon's Portland General Electric Company (POR) are also sources of potentially beneficial investments for those looking to diversify their portfolios.

What does SmartStop's portfolio risk management system have to say about a company like CMS? In the past two years the company has seen relatively healthy price development, despite the seasonal adjustments and fluctuations that are characteristic of a utility. Though there have been several periods of rising risk, the business has some strong fundamentals to rely on.

Check out our suite of online tools and resources today to give your portfolio the technological foundation it needs to stay on top of risk. 

Categories: Stock News

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