Lean, Mean Companies Ready for the Rebound

For the frugal investor, this is the best of times, the sweet spot in the economic cycle. It's not just because plenty of companies are "on sale," but because nearly every company is getting lean and mean in a difficult business environment.

In tough times like these, companies loathe wasting anything. Every cost is scrutinized, and each capital expenditure is weighed and assessed against need. When an economic upturn occurs -- and it will -- profit-margin leverage will be the highest of any point in the economic cycle.

The flip side of this coin, when companies are fat and happy, is the worst of times for the frugal investor. Like Wall Street, many companies indulge in the sin of linear thinking when business is flourishing. Companies wrongly assume that the good times will roll on for the foreseeable future, and wasteful, undisciplined hiring and spending practices inevitably ensue. ...