The financial markets have been driven by the coronavirus, Fed policy, government stimulus, and politics up to now, but a change is in order.
We now see an earnings driven market, which will benefit active over passive managers and hard research, which is our forte. We recommend focusing on operating margins as corporations have done a great job navigating through the pandemic cutting costs, using more technology, shifting more functions online, and restructuring operations/supply lines. All of this is occurring faster than we assumed a few months ago when we began focusing on improving operating margins, operating profits, and cash flow.
Not all companies will benefit equally. We expect the larger, well-financed companies with forward-thinking management to significantly increase market share at the expense of small and medium less-financed competitors. Expect many of them to provide dividend hikes, renew buybacks, and make bolt-on acquisitions. Listen closely to the upcoming earnings