Last month, I wrote that 2012 would be an inflection point toward S&P500 margin compression. This was a short article but it followed a lot of commentary in 2011 in which I spoke about the record level of margins at US companies. My conclusion last month was:
The question is whether this is baked into earnings. It depends on revenue growth of course. If margins fall, this can still be made up for by top line growth. But, the high fliers have prodigious earnings growth estimates baked into their numbers and I believe these high beta stocks will underperform. Lower beta stocks with less earnings volatility, lower growth estimates and higher dividends would outperform in this environment.
My belief tha...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.