During several conversations I have had recently, after discovering my career choice I often hear some version of this question from people: “With inflation at its highest in 40 years and Covid-19 worries still looming,” or “Now that the Fed is raising rates and we have had four weeks of losses to start the year,” and “Gas prices at the pump have doubled in a years’ time and if Russia invades Ukraine,” what are you investing your clients in?
My answer is the same answer I have had for over two decades now. “We buy companies that make things and make money doing it.”
We believe in valuing a company that builds houses, manufactures pharmaceuticals, or produces quality electronic products, etc. based on their balance sheet and forward growth potential. The other side of that equation are companies that do not make tangible products, are not profitable, and are valued by “the street” based on future sales projections with the hopes another widget company does not knock them out of the spotlight until their stock price bangs out another homerun.
I do not often hear this question from our clients who are investors, but I do hear it from folks that are speculators and are wanting to make a quick buck because their neighbors, brothers, co-worker gave them a hot tip.
If you really want to know what we are investing in look in your pantry, medicine cabinet, or follow your check book. Companies like Pfizer, Proctor & Gamble, and Capitol One Financial are what you will find in your portfolios. These companies not only have strong balance sheets, but they pay us to own them. Yes, you read that right! They PAY us to own them in the form of a dividend and the majority of your investments have been paying those dividends for decades.