This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

2013: You Don't Need a Weatherman

Pare down stock holdings of companies that have weak balance sheets. Levered balance sheets tend to be weak balance sheets, and a slowdown in business tends to impact levered companies disproportionately. This advice applies to mutual fund and ETF holdings too. Even looking at the balance sheets of the top 10 to 12 holdings alone will give you some indication of how exposed your holding are to a recessionary environment.

Go investment grade or go home. With respect to fixed-income investments -- that is, debt investments that generate a regular stream of income -- weaker companies stand to be hurt in a sluggish economic environment, resulting in possible bankruptcies or missed payments.

What constitutes a weaker company with respect to its debt obligations? A smaller ratio of free cash flow to debt-payment obligations; revenue streams which are unproven, or more importantly, which are highly correlated to other key economic indicators. Within the Standard & Poor's nomenclature, the highest bond rating offered is AAA, meaning "extremely strong capacity to meet financial commitments" -- exactly what I believe investors are going to need in 2013.

Cut expenses. If you think about it, cutting expenses is exactly the same as improving investment performance. It may even be one better because you don't pay any additional taxes when you lower expenses, but you do when you realize gains or collect more interest. From taking larger deductibles on insurance policies, to appealing property tax rates, there are a myriad of ways to reduce your cash burn.

So, I'm not much of a predictions guy. But I like to think I know trouble when I see it and, I'm sad to report, it appears to be just over the next horizon, somewhere out there in 2013.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.88 0.96%
FB $105.74 -1.13%
GOOG $748.28 -1.02%
TSLA $218.25 0.23%
YHOO $32.96 -1.20%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs