How to Find Good Stocks That Will Survive 2008 Market Crash

Finding good stocks that are able to survive stock market crash is really tough. However, these simple financial ratios can help you to discover these tough stocks. The stocks are so tough, that will only grow stronger after the recession. Make sure you stick with it if you want to be rich from stock market.

Earnings per Employee

You can calculate the staff productivity by dividing the total earnings by the number of staffs. As different industries have different ratios, you should compare staffs' ability to bring value to the company in the same field. Compare yourself a bank with $12k profits per staff with another bank of $98k profits per staff, I bet you can notice the difference.

Good employees maintain the business operation, but great workers will sustain the business growth. And in stock investing, earnings growth does matter, especially during depression. Though times never last, but tough people do.

Return on Asset

ROA can be calculated by dividing the net profits by the number of assets that the company owns. It indicates how efficient the management is in turning the assets into profits. Compare with other stocks on how they do is something you should consider. Lower ROA can be attributed to not having enough expertise to manage the assets or not having the right assets in the first place.

During recession, companies with the lowest return on asset (ROA) are prone to be acquired by stronger companies. Unfortunately, not all low ROA stocks hold the value they want in the eye of larger companies. Therefore, better avoid this type of stocks.

Liquidity Ratio

Liquidity ratio measures if the stock is able to meet the short term obligations. It can be calculated as current or quick ratio. Either way, it is about the liquid asset over its current liabilities. This ratio is critical during recession as the interest rate will increase substantially that time. Although Federal Reserve maintains the interest rate recently, there is no guarantee it will be the same in 2008.

Recently, I noticed some good companies holding substantial liquid assets like never before. This indicates the stocks are preparing themselves of any possibilities of higher interest rates next year, or having enough cash to buy profitable asset at cheaper price in 2008.

Either there is market crash, recession or economic depression in 2008, make sure you get ready yourself. Market crash can be bad to some, but offer great opportunities to smart investors. So, make sure you are one of them.

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Zainul Anuar is the founder and CEO of Stock-Investment-Made-Easy.com, a step-by-step guide to stock investing for beginners website. Find out how you can invest profitably in 2008 at www.Stock-Investment-Made-Easy.com/easy-stock-tips.html