If you're an investment manager or a wealthy individual with a long-term time horizon for investment, now is a great time to be looking at blue-chip s...
If you're an investment manager or a wealthy individual with a long-term time horizon for investment,
now is a great time to be looking at blue-chip stocks. Yields have gone way up because of the correction and, in spite of weaker fundamentals in the economy, there are some very attractive high-dividend-paying stocks from which to choose.
I wrote before how I anticipate a back-to-basics economic strategy that we'll all face as individuals and as businesses. I really feel that Wall Street will go this way as well and this means that investors will be wanting to invest in well-managed, dividend-paying companies with long track records of consistent growth. There will continue to be demand for fast-growing small-cap companies, but everyone I talk with a personal portfolio of stocks wants to be more conservative in their approach going forward. Better stocks, more fixed income securities, and lots more cash in the bank.
Successful large-scale investors like Warren Buffett must be having a lot of fun right now. His business earns hundreds and hundreds of millions of dollars a year in dividends. His problem is finding the right businesses in which to put this money to work. Due to his notoriety, he gets companies that are for sale calling him. I suppose the only reason why Warren Buffett invests in the stock market anymore is that he can't find enough private businesses to buy outright. There just isn't enough of a good thing to go around.
This is why I feel that the private equity business will be so successful this year and beyond. If you have a pool of cash, why take the risk of investing in the stock market? Why not just buy a whole business outright? If I was coming into the investment business as a new graduate today, I'd go right into private equity. Wall Street experience would be optional. Forget the stock market -- it's had its day. If my expectation for rising for inflation is correct, I'd forget the bond business as well. Commodity and currency trading would be the area to go into if you wanted to be in the daily action.
A back-to-basics investing strategy is just what the stock market needs to recover from its excesses of the last few years. This isn't to say that General Electric (NYSE/GE) is a buy right now, because it's yielding almost eight percent. But, there are other large-cap businesses that are attractively valued and yielding solid dividends for investors. As institutional investors get off the sidelines later this year, I expect these kinds of stocks to be in demand as long-term holdings.
Profit Confidential
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