One of the blessings that comes with the territory of investing in individual companies rather than a widespread basket of stocks like the S&P 500 is that you get to allocate your money to specific companies that are either growing faster than the S&P 500 or selling at a substantial discount to the typical stock in the S&P 500. It’s a style of investing that lets you personally find intelligent places to put your money even when “the average stock” in corporate America does not offer you an attractive entry price.
In the ‘50s and ‘60s, you had IBM outperforming the S&P 500. In the ‘60s and ‘70s, you had the tobacco giants and conglomerate-type businesses of General Electric, United Technologies, ITT, and Procter & Gamble roaring to life. Someone who bought Coca-Cola in the early 1980s has been compounding at 15.5% ever since. Buying Disney and Nike in the … Read the rest of this article!
Interesting question came my way from reader Scott:
….But Tim, wouldn’t most investors be better off simply owning index funds instead of trying to pick successful companies themselves?
Scott, I like that question because it cuts to the premise of the site—I write articles for everyday investors, and it is fair to wonder whether it’s all a waste of time and whether low-cost index funds should be pursued.
First of all, I’d like to start by observing the great overlap that exists between the two strategies. If you look at an S&P 500 Index Fund, what are going to be some of the large holdings? ExxonMobil, General Electric, Procter & Gamble, and Johnson & Johnson.
What are the stocks I talk about buying individually? ExxonMobil, General Electric, Procter & Gamble, and Johnson & Johnson. There is a huge overlap between the companies I mention approvingly here, and the companies that … Read the rest of this article!
About this time last year, I talked about Fayez Sarofim for the first time when I referenced his extensive art collection and some of the very interesting personal life that has marked his eight decades in the United States. I was recently reviewing his ten largest holdings registered to Fayez Sarofim & Co., and I am very impressed by the quality and growth characteristics of the portfolio that he has put together.
When I study how he has made his money, it’s one of the best things I’ve ever seen, and that is not praise I give out lightly. This is how he allocates his fund money: 5.9% to Philip Morris International, 5.3% to Apple, 4.6% to ExxonMobil, 4.3% to Coca-Cola, 3.7% to Chevron, 2.9% to Nestle, 2.8% to Johnson & Johnson, 2.8% to McDonald’s, 2.6% to ConocoPhillips, and 2.6% to IBM.
That’s it. That’s the magic formula. If you … Read the rest of this article!