Stock Gumshoe readers clearly have a yen to find out which stocks are safe enough to “hold forever” — I wrote about a teaser from Paul Tracy for StreetAuthority’s Top Ten Stocks almost two months ago, but my plans to finish it up and complete the list of stocks for you drifted away in the dog days of Summer.
But you, dear readers, insisted — I’ve had tons of folks asking why they can’t find “part two” of our look at Tracy’s ten best stocks, and though I’d be delighted to tell you that it’s just a problem with the new site design and our search feature, I’m afraid the real problem is that I didn’t write it yet.
And that, I’m delighted to say, is a solvable problem — surely a rarity these days.
If you missed out on the basic idea behind this pitch, it’s that there are stocks with dramatic long-term performance that are held by lots of bigwig investors and politicians, and you can buy the same stocks they own. Here’s a taste:
“One of our “Forever” stocks is owned by a staggering 22 members of Congress. James Sensenbrenner Jr. (R-WI) reports that via his wife, he has a stake of up to $500,000 of the stock. And in 2010, that stake earned at least $15,000 in dividends from the shares.
“You can see for yourself in his latest financial disclosure I had our research team dig up on the Representative:
“Here’s the funny thing. When you find a stock that a herd of Congressmen love… you usually find that some of the richest people in the world also invest in it. It’s almost like there is a direct link between the two…
“In fact, Representative Sensenbrenner and his wife could shake hands with the world’s richest man — Mexican telecom magnate Carlos Slim — at this company’s annual meeting. That’s because along with a couple dozen members of Congress, Mr. Slim also has a stake in this world-dominating company… owning more than 12,550 shares worth $879,000.
“It’s the same story with another ‘Forever’ stock we found.
“It’s owned by dozens of the market’s biggest players. Legendary investment firm Fidelity owns more than 15,500,000 shares worth almost $8 billion. T. Rowe Price holds over 10,100,000 shares, according to Bloomberg.
“Twenty-five members of Congress also own the stock.
“That includes Jane Harman — the second-richest member of Congress, with an estimated net worth of $293 million. That is to say she was the second-richest member of Congress.
“Ms. Harman resigned in 2011. At last count, she held over $250,000 in this company’s stock.
“But what’s most surprising about this select group of 10 stocks we’ve identified? It’s not the fact that millionaire Congressmen… or billionaire ‘super’ investment firms like Fidelity and T. Rowe Price… are lining their pockets with the shares.
“Instead, it’s that everyday investors like you, your family, and your friends are able to invest in these exact same companies.”
So there you have it — what could go wrong, right? Of course, the fact that Jane Harman has $250,000 invested in a stock means less than one tenth of one percent of her portfolio is in this stock, which ain’t exactly the kind of conviction that you’d think would maker her move hell or high water to get that firm some gummint contracts … but still, I like the idea of “forever” stocks even if we have to put quotes around the “forever” part — I’m a big believer that long-term positions in strong, growing, dividend-paying companies that can compound your money over decades is probably the best foundation for an investment portfolio, even if I sometimes am less disciplined than that in practice.
Or, as Paul Tracy puts it:
“I believe the simplest way to turn any amount of money into a windfall is to find a stock you want to hold forever, invest, and then forget about it.”
That’s the way most of us were taught to invest, and there’s a certain logic to it — along with, as we’ve learned over the last decade, a fair amount of risk if you do the first part (the “find a stock” bit) poorly … many brokers don’t even like to use the terms “blue chips” or “widows and orphans stocks” anymore, and it’s not just because big stocks (like Eastman Kodak most recently) sometimes die long, slow deaths but because everyone now watches their portfolio tickers on an hourly basis and is now so much more focused on the minute wriggles of the global economy — even if you do “find the stock” right, having patience to let it grow and compound is far more difficult today than it was 50 years ago, when you might only check on the stock tickers of your holdings in the newspaper from time to time.
So let’s look into the remaining teasers, shall we? I think I covered six of ’em back in early August when this ad began to run (BIP, GOOG, PM, MA, AMJ, MKL for the quick shorthand), and most of those stocks are still within a pretty short hop of where they were then, so we’ll look at the clues for the rest … Oh, and that one that’s “owned by dozens of Congressmen” is Google, by the way, so that’s already on the list …
“‘Forever’ Stock #4 is a fund whose job is simple — invest in the most stable utility stocks on the earth and pay investors a fat dividend yield.Are you getting our free Daily Update
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“It owns telecoms in New Zealand, electric companies in Brazil, and energy businesses in Wisconsin.
“It’s returned 11% per year since its inception in 2004… and it has boosted its dividend 28.9% along the way. In total, the fund has paid 89 consecutive dividends and currently yields 6.0%.
“But don’t expect to have heard of this one… it trades only 80,000 shares a day — about what Apple trades in two minutes.”
This one must be the Reaves Utility Income Fund (UTG), a closed-end fund run by a utility-specialist investment firm that’s been around for about 50 years (the managers, not the fund — the fund IPO’d in 2004). They basically take the relatively small universe of what they consider to be “utility” stocks (a few hundred), pick their favorites, and manage that portfolio. Oh, and they also borrow money to magnify their returns (and their risk, which is why the shares of the fund collapsed in the credit crisis, though they recovered fairly quickly).
They use a pretty broad definition of “utilities” R