Let’s Talk About: Stocks
I like to buy stocks where I know the company and know the management.
Not an easy subject as it’s all opinion, not factual. I like to buy stocks where I know the company and know the management (only own 3 stocks). For our clients we own the S&P 500 and a couple of funds. My competitors ask what value does that add. Really not much but it’s what’s under the surface that makes me recommend and continue to own the 500
For example I’m asked mostly by competitors why I don’t own mid cap or small caps and my answer is simple - Instagram!! The S&P has about 3% Facebook and they bot Instagram a few years back for $1 Billion or essentially a small cap valuation. There isn’t a small cap manager I know who can take that big a position in one security. What’s the catch, Facebook is on top of their industry and knows more about value then any manager I know
The amount of M&A in the 500 is staggering and my bet is they, the underlying companies, know more about their industry and the value they can create than an outside investor guessing at value.
I’m not saying to own Facebook, in fact I think it’s a poorly run company, with horrible management and would never own. What I am saying is they know their business and can invest more judiciously than money managers It’s a strong argument to own the S&P.
I don’t know about you but I think in 20 years the S&P will be higher than today, not sure I can say that about any individual company. I don’t know how much higher but definitely for me the risk reward is historically there.