For a cyclical industry, this formula will select the company when it has improved it’s margin and is at the best level at present. Naturally the company’s stock price will also be at the peak. So investing here means investing at the peak margins at peak price. Any margin decline will lead to massive derating in the future.
It can work in companies where there is some fundamental change in the business, like premiumization of product, and the margins will sustain in the future.
| Subscribe To Our Free Newsletter |
