Just about all the money I run is invested using what I’d call relatively defensive strategies. My wife’s pension is in an index tracking portfolio split between stocks, corporate bonds and government bonds. My pension is in a collection of relatively large, profitable, steady growth dividend payers. That’s a pretty big change from the 2008-2010 period where my focus was on small-cap deep value stocks.
At the moment I’m going through the process of reviewing some of my current holdings as they all seem to be publishing their final results at the same time. So far I’ve got AstraZeneca, BP, Reckitt Benckiser, BAE and Royal Sun Alliance to look at. What’s really interesting is that so far the reports are all fairly happy.
Words like ‘momentum’, ‘progress’ and ‘shareholder value’ keep cropping up, and the dividends keep getting raised. I guess this is what Buffett meant when he spoke about how it was much nicer to invest in prosperous businesses rather than struggling turnaround situations like Berkshire Hathaway was when he acquired it.
With the deep value stocks the reports were often really miserable. Now, I realise that company fundamentals and share prices often have a very loose relationship in the short-term and that’s what a lot of deep value is about. But it’s still a grind to read about how people are being laid off and how the company is in discussion with the banks, or how some customer or other has left and no dividend will be paid.
I find investing in good companies just an immensely more positive endeavour. Every month I check the portfolio and there, right before my eyes, is a list of the most recent dividend payments that have added to the cash balance.
It’s like being paid to do nothing, which is something I’m all in favour of. In fact some people think that dividend payers are boring – well if getting paid for nothing is boring then I like boring.
I think it was George Soros who coined the term ‘reflexivity’ where a cause and effect relationship works both ways. With investing this means that the investor can change the portfolio and the portfolio can change the investor. I know that with a collection of large, stable and dividend paying stocks the effect the portfolio has on me is to keep me happy and focused on quality, and hopefully the’re both factors that will keep me on the ball for many years to come.