My biggest pet peeve regarding common stock investing is how so many people have a tendency to over-generalize this asset class. Commonly held beliefs such as investing in stocks is risky, or that the stock market is overvalued, or that the fed is driving stock prices, etc., are just a few examples illustrating my point. In truth, common stocks are as individually different as people are individually different. When dealing with human beings, most reasonable thinking people would reject prejudicial statements. Personally, I believe we should have the same attitude about common stocks.
Instead of attempting to put them all in the same basket, I believe it is more rational and prudent to judge each common stock based on its own merits and attributes. This is why I continuously point out that it is a market of stocks and not a stock market. All stocks are not the same, therefore, they should not all be painted with the same broad brush. Consistent with this notion is that it also logically follows that not all investors are the same. Consequently, with these thoughts in mind, different strokes (stocks) for different folks (different goals, objectives and risk tolerances) is the more appropriate stance.
Moreover, my view of stocks as an asset class which is comprised of a very diverse group of investments persuades my belief that it’s a mistake to try to time the market.
My message is simple, quit worrying about the stock market and the macro, and instead focus on specific individual common stock investments that are capable of meeting your unique and personal goals and objectives.
As I have often previously stated, my personal experience spanning more than four decades of investing has convinced me that good common stock investments are available in all general market environments. In other words, whether we are in a bear market or a bull market, good long-term common stock investments can be found. Consequently, it has never made sense to me to avoid a good investment based on pre-judgments or biases about what the overall market may or may not do or did.
As an investor, I look for investments that meet my needs and requirements where and when I can find them. Therefore, when I see an attractive candidate, I research it as thoroughly as I can and then invest with confidence and conviction. But perhaps most importantly, I do this without worrying about things that I cannot control or evaluate. More simply stated, I like facts over opinions.
2013 is Over – 2014 Brings New Opportunities
In the general sense, 2013 was a very profitable year for common stock investors. One insidious aspect of the generally strong performance of the stock market is how it has led many to believe that stocks have therefore become overvalued. However, and in truth, there are many stocks that have become overvalued as a result of such strong 2013 performance, but not all stocks. Admittedly, it is harder to find good stocks that are fairly valued, or better yet, undervalued after such a strong year than it was, for example, in the spring of 2009. However, I have found what I believe to be numerous candidates of attractively valued common stocks that I also feel are capable of meeting the unique goals and objectives of different types of investors.
This series of articles is offered to reveal just a small sampling of many currently attractive looking common stock investments that my early 2014 research has uncovered. Each subsequent article will focus on a specific type of common stock, with my ultimate goal of providing common stock research ideas that offer something for everyone. My primary categories will include stocks for growth, stocks for growth and income, stocks for dividend growth, stocks for current dividend income and semi-cyclical growth and income. Moreover, each primary category will include subcategories for aggressive, moderate and conservative investors.
The primary focus of the selection criteria for this series of articles is valuation. After such a strong year in the general stock markets, I have become concerned that many people believe that all stocks have become overvalued. Consequently, I embarked upon a quest to identify as many fairly valued or undervalued companies as I could find. Therefore, this series of articles will present numerous common stocks of various categories that I believe represent attractively valued candidates worthy of researching deeper in today’s market environment.
However, this series will not include all companies which I identified as fairly valued today. Additionally, my search placed a premium on consistency and quality. Therefore, I will only offer those candidates that I believed possess reasonably consistent historical records of earnings growth and/or dividend growth. In other words, the more consistently each selection was able to grow their business, the better I liked it. On the other hand, since perfect operating results are rare to nonexistent, I did accept the occasional down or flat year. Although some may disagree, I place a high value on a solid operating track record and consider it the first step towards giving me confidence that operating excellence may persist going forward. In simpler terms, I would rather spend my time digging deeper into a proven company over a potential turnaround.
Moreover, since the underlying theme of this series of articles is “something for everyone,” I was not rigid with specific earnings growth rates or dividend yields. On the other hand, and in the more general sense, I did strive to only offer companies with histories of producing above-average numbers. Consequently, these attributes vary according to the type of company I will be covering in each specific forthcoming article.
For example, my pure growth stock selections will only include companies with histories of earnings growth greater than 15% per annum, but more importantly, those that are expected to continue growing earnings at rates of 15% a year or better, or at least close to it. To be even clearer, the growth stock selections did not have to be expected to continue growing at historic rates, but future growth rate estimates had to meet or be near the 15% or better hurdle. But most importantly, the current P/E ratios had to be aligned with the estimated future growth rate to be included.
Regarding dividend paying stocks, they will be categorized according to the appropriate total return potential within their respective grouping. Therefore, certain subcategories will focus more on dividend growth while other categories more on capital appreciation. Therefore, it will be up to each reader to pick and choose those specific candidates that meet their own goals and objectives. Once again, the underlying idea is to offer something for everyone. Within each article I will clearly articulate the goals and objectives that I believe each candidate possesses in order to make the process more efficient for the reader.
Since a picture is worth 1000 words, what follows is a sneak preview example of the type of company that readers can expect to see in each subsequent article in this series. Additionally, each article will include several subcategories based on cap size, time in existence, and other fundamental metrics.
Stocks for 2014: Growth Part 2
In part 2 of this series of fairly valued stocks for 2014 I will review companies with significantly above-average historical and forecast earnings growth