David Trainer, CEO of investment research firm New Constructs, said 2022 marks the end of the era of cheap money, and it’s bad news for companies following the “growth at all costs” approach. “. Over the next year, he told CNBC Pro, investors will need to exercise caution in distinguishing between good and bad companies. That’s because the US Federal Reserve’s rate hike in 2022 “ends the era of super easy money” and exposes many companies with bad business models. He called those companies “zombie stocks” with heavily burned cash. He said he is seeing stocks “hit hard” after their bad business model was exposed. “Too much capital has been allocated to bad investments, bad people and bad ideas eg FTX, Zombie Stocks, Meme Stocks, ESG,” says Trainer. He is referring to the dire consequences after crypto exchange FTX filed for bankruptcy in the United States, amid investigations into the loss and misuse of billions of dollars of its deposits. user. “Until these misallocations are rectified, our economy and markets will have a hard time growing at a normal rate,” he said. He urges investors to do their homework. “Did the companies in your portfolio have balance sheets and cash flows to counter a downturn in economic activity, or did they take an unsustainable all-cost growth approach as the era Free money ended?” “If the latter, investors may be holding stocks with high downside risk (even more than they might already have),” added Trainer. Trainer, a former Wall Street analyst who has been bearish on tech stocks, has compiled a list of “zombie” companies that are in danger of running out of cash. Zombie companies refer to those that have been in the market for more than 10 years and make enough money to operate, but do not have to pay interest on their debt. Trainer told CNBC Pro that those zombie stocks that could “go to zero,” include online used car retailer Carvana, online home appliance retailer Wayfair, payments company Affirm and cloud services company RingCentral. Some of those stocks have lost most of their value by 2022. Carvana is down about 98% for the year, while Wayfair is down about 83%. Claims lost almost 90% and RingCentral dropped about 82%. What to buy instead Growth stocks like tech companies have benefited from the era of low interest rates. But investors should now be selective when looking at the sector, Trainer said. Trainer told CNBC Pro that the best tech stocks to buy are those with strong cash flow and undervalued by the company’s ability to generate cash in the future. His favorite tech stocks include Qualcomm , Alphabet , Cisco and Oracle .