Which ASX shares should you be avoiding if you’re worried about inflation? Are ASX shares like Redbubble Ltd (ASX: RBL), Cochlear Ltd (ASX: COH) and Amcor Ltd (ASX: AMC) safe?
In this article & video, Owen takes you through his checklist of metrics to keep an eye on.
Owen’s checklist for companies to AVOID
In Owen’s experience, the types of companies that are being hurt by inflation include those that score poorly for these metrics:
They sell discretionary products, like consumer-facing retail products such as fashion. In other words, they’re not mission-critical like software.
They don’t have intangible value wrapped around their service, such as brand equity. For example, Cochlear (ASX: COH) has brand prestige for implantable hearing aids.
The business model is sensitive to supply constraints. Redbubble (ASX: RBL) is one such company. It is facing higher input costs for t-shirts and increased shipping expenses due to fuel costs and driver availability. And it cannot pass on these costs like say, Amcor (ASX: AMC) can.
The financial position is weak. It’s weighed down by lots of debt, poor cash flow, no profits and legacies of empire-building management teams (e.g. Goodwill buried under intangibles and exploding share counts). Vocus Group (ASX: VOC) was an example of this, so was Slater & Gordon (ASX: SGH).
