The Triple Threat of Blue-Chip Investing

I watched through the entirety of that Warren Buffett video I posted the other day when he discussed that Procter & Gamble would be a great long term holding, but not the best long term holding, because of concerns of unit growth and pricing power in response to intense competition. Buffett made an offhand comment about how a lot of money got made in large-cap stocks during the 1990s up until that point because of the outperformance of growth rates for blue chips compared to then-existing expectations. Specifically, Buffett said, if something has a 12% coupon rate and you end up getting 20%, you’re going to going to make a lot of money.

Put another way, the upshot of investing in super large corporations during the 1990s is that you not only got the benefit of owning something with extraordinarily durable profits, but you were also getting something like 8-10% … Read the rest of this article!