Which companies are best positioned to grow during this economic downturn? Not the companies doing what the Street wants.
Wall Street loves it when companies significantly reduce headcount and execute stock repurchases during economic downturns. Those are exactly the companies you do not want to own coming out of the downturn because they will not be well-positioned to capture growth.
- The best Technology companies always run lean and always invest in their products and people.
- Weak Technology company CEOs that do not understand their Product Market Fit at a nuanced level are the type of CEOs that dramatically reduce headcount and execute stock buybacks when the economy is slow. Why? Because large shareholders will be happy and therefore the Board will be happy and the CEO gets to keep his/her job for another day. You know who won’t be happy? The employee base and customers. There is nothing worse than a Technology company that has under-invested in its product portfolio and people. It shows by way of long-in-the-tooth products and under-motivated employees.
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