As I have been watching the market closely during this reporting season, I wanted to share my perspective for people to comment on and share their thinking. It's clear to me that the current economic environment is going through some tough times, with employee costs and inflation causing a reduction in margins for many companies. But I don't think this is the end of the world for the market, and there are still opportunities to be had.
One of the key characteristics I am looking for in companies right now is pricing power. It's important to invest in companies that can increase their prices without losing a significant amount of customers. Xero and Audinate are two examples of companies that I am aware of which have been able to increase their prices without much churn.
Another essential factor to consider is the company's balance sheet. I am looking for companies that are self-sufficient and capable of taking advantage of the current market conditions with smart management at the helm of things. Objective Corp and Nanosonic are two examples of companies that fit this bill.
Lastly, I think it's important to invest in companies that are being run by management who are aware of the market conditions and can steer the company toward profitability. It's important to avoid investing in companies that are only chasing revenue at any cost. for example, Megaport and Dubber they both are growth companies and had significant fan following last year, both have been increasing their revenue along with expense but Megaport has recently started to put breaks on the spending and started cost-cutting exercise with plan to reach free cash flow stage with existing cash on other hand Dubber has no sign of it and it still lives in la la land. If Megaport achieves what it promises, there will be significant upside from here in my view.
There will be other kinds of companies that will face more effects because of the nature of their business, for example, Symbio - counts US Tech company as its clients and if US Tech company are putting a break on their spending there will be affect on Symbio no doubt as we have seen recently in their guidance downgrade but again Management plays a crucial role here, It would be interesting to see how it pans out.
Regarding the tech sector, I am of the view that it still has significant upside potential. There have been some recent lay-offs by tech giants like Microsoft, Google, and Amazon, but I don't think this is a sign that these companies are in financial difficulty. Rather, they were in a hiring frenzy last year and are now removing higher risk bets and allocating their resources more prudently. I believe these cost-cutting measures will shine through in future reports and that tech giants will maintain their margins and continue to grow.
Overall, I believe that there are still opportunities for investors to find quality companies and make smart investments in the current market conditions. It's important to do your due diligence and look for companies that have strong fundamentals and can weather the current economic environment.