(Value Investing Legend Walter Schloss Digesting Some Tasty Applesauce)
I don’t talk much about long-term investing, but I do manage longer-term investments (holding period of at least 12-18 months) for members of my family. I look for great, reliable firms that usually pay a handsome dividend. Regarding stop losses, I have price levels in mind where I am willing to admit my thesis is wrong, but they vary greatly and are much wider than in names I trade (a topic for another post–not within the scope of this post for discussion).
I also believe that you would be remiss not to conduct some form of technical analysis before allocating capital into any position. Shunning price action because you are a fundamentalist and/or you think “the market is stupid,” is akin to going to college to study creative writing and refusing to study and flunking your required Chemistry class because you say, “I’m not a scientist.” In other words, it is pure ignorance. A little bit of due diligence looking for a relatively healthy chart–even for a value investment–will go a long way. As an example, consider that PG went from $75 down to $43 during the 2008-2009 bear market. Thus, blindly buying and holding, even quality firms, is textbook laziness.
As a bull market matures, there will be inevitable rotations. Eventually, the large cap, “safe” stocks see inflows just as the market starts to realize that perhaps CMG won’t be overtaking XOM‘s market capitalization anytime soon. That process could take anywhere from a few months to a few years. Regardless, it will happen; Hence, the phrase “long-term investment.” Below, you will see five investing ideas of firms that are defensive in nature. I believe all five are in good shape technically, and will still be conducting business at least five decades from now. If you are looking for entry points for your long-term portfolios, I hope these ideas help.
(Disclosure: I have bought all five of these issues listed below for members of my family)
Thank you Chess, this ideas are always interesting, long term portfolio management/investment is a topic often overlooked by traders but I think is a good choice for people that want kind of a steady income with more risk than treasuries.
Good post. PFE is on my watch list this season.
Thanks Chess. Don’t you ever stop working?
What are your views on the precious metals as a percentage of a long-term portfolio, Chess?
Money managers typically advise between 10 and 20 percent,
with a small percent of that being speculative….
At this point, not more than 5-10%. However, i would buy on dips.
Its great when fundamentals and technicals come into sync.
Great post! Good looking charts. I think for the ham and egger like me a good selection of longer term holds is a good idea. I like long term growth tales with dividends. HRL looks good but CPB has been getting a little ugly as of late.
The reason I dismiss technical analysis (and I think I speak for many other value investors here), is less a matter of laziness or ignorance, and more a function of the technical community failing to provide the mechanism for why technical analysis should work. The mechanism behind value analysis is simple: daily movements are somewhat stochastic, and thus tend to create short-term opportunities for discounted earnings. Perhaps in a future column, you could enlighten us with your explanation of the technical mechanism.
It is not that technical analysis *should* work, it’s that it does, indeed, work. Why? Because it is the ACTUAL vote of the aggregate price discovery mechanism of the marketplace, as opposed to plugging inputs into a mathematical formula and concluding a certain intrinsic value. Price action and volume are the two benchmarks of technical analysis from which all other technical indicators derive. There is nothing else that “works” better than price and volume, as we see what market players are actually doing with their capital. I will put more faith into that reality than what one thinks a firm ought to be worth based on a myriad of fundamental factors, most of which are moving targets, and have likely already been considered and negotiated by the market anyway.