When stock prices are falling, the best mindset to have is a long term one. High quality stocks such as Sogou Inc has fared well over time in a fickle stock market, which is why I want to bring it into light amongst all the chaos. Below I take a look at three key features of what makes a robust defensive stock investment: its size, financial health and track record.
Sogou Inc. provides search and search-related services in the People’s Republic of China. Sogou was formed in 2005 and with the company’s market cap sitting at US$2.2b, it falls under the mid-cap group. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.
With zero debt on its balance sheet, Sogou isn’t constrained to debt obligations and covenants, which can be burdensome during financial downturns. Highly-levered companies have to maintain a cash cushion to meet near-term interest payments as well as meet unforeseen circumstances. With no lenders’ needs to tend to, Sogou enjoys financial flexibility and independence – an invaluable position to be in during bear markets. Sogou’s enviable cash position of US$1.0b provides it with more than enough liquidity to meet other near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
SOGO’s annual earnings growth rate has been positive over the last five years, with an average rate of 91%, outperfoming the industry growth rate of 26%. It has also returned an ROE of 4.8% recently, above the market return of 4.8%. Characteristics I value in a long term investment are proven in Sogou, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Based on these three factors, SOGO makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy SOGO, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for SOGO’s future growth? Take a look at our free research report of analyst consensus for SOGO’s outlook.
- Valuation: What is SOGO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SOGO is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.