If you had $942 Billion USD to spend buying companies …. What would you buy?

September 6, 2019

I’ve commented previously in this newsletter on the short term underperformance of our preferred investment strategy – investing in strong businesses with consistent dividend growth and healthy balance sheets. Referred to as a “value” approach to investing. The alternative style is called “growth” which invests in businesses showing strong growth paying less attention to fundamentals related to business health. For the last few years the stock prices of growing business have exceeded those of financially healthy businesses. This will not go on forever – given history.

“NOTE: This is not a recommendation for the purchase of any of these securities, I am not as a registered representative of FundEX licensed to recommend or sell individual securities.”

The graphic above could not have explained the disparity in stock values we are seeing today any better. It poses the question, “If you had $942 billion, would you rather buy one popular growth stock that generates $10 billion in income (Amazon) OR a basket of well-diversified stocks that generate $102 billion in income with $44 billion left over to spend elsewhere?  It’s simply a question of value… and of diversification.

Good active value managers have outperformed over the long term and I continue to recommend value funds as part of a well-managed portfolio that can withstand the ups and downs of the market. It’s not if value will outperform growth – it’s when.

Note: I am not suggesting or recommending the purchase of any of these stocks – they are simply presented to make a point about investing with a value style.,