This article was coproduced with Chuck Walston.
Nicholas Ward’s recent article, “How I Beat The Market Again In 2023,” has just hit the stands in our Investing Group. As a kindred spirit in the investment world, Nicholas and I share a similar approach to the market.
Contrary to the pessimistic voices, which even include a certain Mr. Buffett, Nicholas and I firmly believe that regular folks can consistently outperform the market.
“My biggest pet peeve when it comes to investing is the constant negativity by the uber-bears, the disheartened traders, the financial advisers or other know-it-all “professionals”, and even to a certain extent, the Bogleheads, who all stand on their collective soapbox together and declare that it’s impossible for the average Joe living on Main Street to beat the market.”
While I may not share the same level of annoyance, the lack of market understanding is something I find equally exasperating. In fact, I have discussed with Brad the idea of co-authoring a book to help demystify the vast potential of investing and its role in transforming lives for the better.
I want to emphasize that I am just an “average Joe.” Prior to my finance journey, I grew up in challenging circumstances, served in the Army, and later pursued a career in law enforcement. With no formal education in finance, I delved into dozens of books and market research. If I can do it, so can you. It’s as simple as that.
The Proof Is In The Results
Anyone can claim to beat the market, but the question remains – can they back it up?
The table below showcases the returns of my Buy-rated articles published from October to December, with the assumption of an equal investment in an S&P 500 index fund and the highlighted stock on the day the articles appeared.
It’s worth noting that out of the 20 stocks rated as buys, 16 yielded positive returns. Thirteen outperformed the market, with 10 recording double-digit gains. My buy-rated picks over the last quarter outperformed the S&P 500 by over 8%.
These numbers also do not reflect the stocks’ total returns. The listed tickers have an average yield of 2.48%, a full percentage point higher than the S&P 500.
The Foundation Of My Stock Selection
When evaluating a stock, I prioritize companies that exhibit certain key characteristics.
A company I consider must have investment-grade credit ratings. I also analyze factors such as current debt, cash and cash equivalents, and a firm’s debt
Navigating the Stock Ladder: An Expert’s Insight into Investment Strategies
Every stock investor is on a quest for the next big winner. But how does one differentiate between the run-of-the-mill stocks and those that possess the allure of a golden egg? A seasoned investment guru enlightens us with his holistic approach to stock ratings and recommendations.
The Investment Philosophy
Before diving into the nitty-gritty of stock ratings, the investment guru emphasizes the importance of historic performance and dividends. Citing the relative performance of companies against the S&P 500 over the last decade, the guru acknowledges the need for caution, affirming that past performance is not a guarantee of future success. He further stresses the significance of companies with a long track record of paying dividends and with moderate payout ratios.
Expressing a penchant for companies with moat-worthy businesses, the investment guru segments his interests, singling out oligopolistic businesses such as Home Depot (HD), Lowe’s (LOW), Walmart (WMT), and Costco (COST) as favorable investments.
The guru makes occasional exceptions, citing examples such as Nexstar (NXST) and Prologis (PLD), stating that despite deviating from his standard criteria, these companies still dominate their industries and offer safe, rapidly growing dividends.
Moreover, the guru seeks a valuation that provides a margin of safety, albeit evolving to appreciate the inherent safety in top-notch companies at slightly below perceived fair valuations.
Stock Ratings
Upon reviewing the listed companies, the investment guru avers a surprising sentiment. Despite substantial gains, most stocks are still viewed as favorable investments. Titles such as FITB, BXP, USB, and AVGO earn the label of “Reasonable Buys,” while the rest are rated as “Buys,” with potential for upward movement in their ratings given a slight upturn in their share prices.
The guru gives optimistic projections for companies such as CMCSA, MDT, JCI, KR, CI, APD, GOOG, DFS, and ELV, citing the potential for double-digit upside in their stocks.
The one exception is PepsiCo, which is undergoing a re-evaluation following a recent announcement from Carrefour, prompting a reassessment of the investment thesis due to potential market implications.
Validating Performance
The investment guru defends his approach by citing evidence of consistent market-beating returns over extended periods, underscoring that recent successes are not isolated incidents. Reference to previous articles establishes his proven track record, reinforcing the confidence in his investment strategy.
The guru further motivates fellow investors, inspiring the belief that market-beating is not an exclusive privilege, but an attainable feat for all. Additionally, he debunks the myth that a small percentage advantage in returns holds little significance, arguing that it can lead to substantial differences in long-term gains.
Final Thoughts
In a final rallying cry, the investment guru urges investors to maintain perspective and emphasizes the potential for superior returns over longer periods, even in the face of short-term market fluctuations.
The guru’s investment philosophy, ratings, and testimony epitomize a narrative of perseverance and diligence in pursuit of superior investment returns. The message is clear: with the right approach, astute investors can scale the stock ladder and attain significant financial gains.
