Adjusting Investment Strategy

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) January 26, 2012 --

Adjusting to economic ebbs and flows requires an understanding of how industries are characterised by their relationship to the economy. It is important to distinguish between sectors that are affected by economic changes and those that are more immune. A non-cyclical share’s performance is minimally affected by upward or downward movements in the economy. Companies who fall into the non-cyclical category produce, for example, food and pharmaceuticals. These are goods that people must continue purchasing, even if the economy is not doing well. Non-cyclical shares, also called defensive shares, repeatedly outperform the market when economic growth slows. Cyclical shares, on the other hand, depend on whether or not the economy is strong as people have extra income to spend on luxuries.

AdvTech provides formal education services from pre-primary education to post graduate degrees. Its brands include amongst others Crawford Schools and Trinityhouse. It is a quality company and boasts good operating margins, a consistently above-average ROE and strong cash generation. The group's defensive nature is illustrated by the high level of annuity income. Trading on a rolling P/E of 14-times and 3.3-times its NAV, we feel the share is fairly valued and would recommend investors to hold their shares. The share price is underpinned by a solid dividend yield of 4%.

Metrofile is the information and records management market leader and boasts high operating margins, a good ROE and good cash generation. The group is a leading player in its field and operations have historically been non-cyclical which adds to the appeal of an investment. Trading on a rolling PE of 10.9 and at 2.7 times to its NAV we feel the share offers value and would recommend investors to buy the share. The share price is trading just above all its moving averages and the trend remains bullish. Although it is becoming more overbought, it still has the potential to test the long-term resistance trend line, before retesting the resistance at the 220c level.

Learning to simply realise that different industries respond differently to economic fluctuations can help keep your money safe. When the economy cools off, the cyclical companies will be hit the hardest, so seek out stable companies that produce things you cannot live without.

Investing is an essential part of any wealth creation strategy. Investment solutions form part of a long-term financial plan to secure your financial future and a means for achieving your life dreams. An investment is the purchasing of an asset for profit, via income, capital appreciation or a combination of the two.
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