In the current market cycle, growing momentum may favor companies that are more services-oriented than product-focused and that are thus light on assets despite having solid free cash flow. Think companies in the software, financial services, insurance, or health care services spaces: all of these tend to earn fees or margins off of transactions that don't require physical production to execute. These firms can also convert a large share of their revenue into free cash flow due to a general lack of capital equipment.
Three companies in particular may fit this profile very well and may therefore be poised for success as the market shifts. Ryan Specialty Holdings Inc. (NYSE: RYAN), Kinsale Capital Group Inc. (NYSE: KNSL), and Casey’s General Stores Inc. (NASDAQ: CASY) may be nimble enough to grow revenue while keeping costs and assets down. Each also does so via different mechanisms and as part of a variety of industries.
