With so much going on in the macroeconomic environment, it’s easy to run from an intelligent investment approach and instead cower away from equities; the words of an investment guru should hopefully abate some of that fear and help individual investors confidently invest in some fantastic businesses selling at cheap prices...
In a recent interview (here), Consuelo Mack of Wealth Track spoke with Donald Yacktman, who runs the Yacktman Funds; for those searching for a successful investment strategy, look no further: in the past three, five, ten, and fifteen year periods, the fund has beat more than 99% of its’ peers. During the interview, Mr. Yacktman had this to say:
“I’ve been doing this for over forty years, and I can’t remember another period of time where I’ve seen so many high quality, profitable businesses selling at prices relative to the market this cheaply. To give you an illustration, the 30 year treasury today [January 5th, 2012] has a lower yield than many of these companies like Pepsi (PEP) or Johnson & Johnson (JNJ) or Procter & Gamble (PG). That’s a very unique period of time.”
At the close on Friday, the 30-year Treasury yielded 3.07%. This compares to 3.13% for PepsiCo, 3.27% for Procter & Gamble, and 3.48% for Johnson & Johnson; in addition, while the Treasury yield will stay stagnant for more than a quarter of a century, lets look at how these compaanies have faired historically: since 1987, PEP, PG, and JNJ have increased their dividend payouts (per share) more than ten-fold.
As I noted above, it’s easy to step back from the markets while developed markets muddle along and deal with piles of debt; for long term investors, now is the time to buy great businesses and to profit on the short-term blindness of the herd.
About the author:
I think Charlie Munger has the right idea: "Patience followed by pretty aggressive conduct."
I run a fairly concentrated portfolio, with 2-5 positions accounting for the majority of my equity portfolio. From the perspective of a businessman, I believe this is sufficient diversification.