FYI | Nov 18 2011
By Peter Switzer, Switzer Super Report
Let’s get real; if you had a Warren Buffett approach to investing you would sell all of your stocks and go to term deposits and wait. The ‘Oracle of Omaha’ maintains that if you don’t understand it, don’t invest in it and, at the moment, if you can’t understand Europe and its potential to hurt or help your portfolio, then you should head for the safety of fixed interest with a bank.
Right now the stock market is trying to fight the forces of gravity powered by the uncertainty of Europe and now there’s the potential negative input from the so-called Super Committee in the US that has to come up with a fiscal austerity plan or else a program of automatic cuts will be implemented in 2013. If you can recall early August, it was the combination of the Congressional impasse on austerity measures and Greek debt concerns that sent the market hurtling down.
On 8 August, our stock market gave up $35 billion of share value with stocks diving 2.9%. The next day we endured a 5.5% slump at one stage before we got that weird 269-point gain by day’s end! We are in strange, inexplicable days and it makes me think of the Buffett advice: “If you don’t understand it, then don’t invest in it”.
However, just this week the US billionaire revealed on CNBC that his listed Berkshire Hathaway investment company has plonked $US10.7 billion into IBM shares since March. Clearly, as I have been suggesting to my brave-hearted clients, viewers, listeners and readers, he has been buying the dips. He has been true to his other pearls of advisory wisdom: “Be fearful when others are greedy and be greedy only when others are fearful,” and buy good quality companies that you want to “go into business with”.
And how worried is he? Well, not enough to stop him about buying some 64 million shares in IBM, which means he now holds 5.5% of this IT giant!
Right now there are so many issues that could hurt our wealth building goals and they include: rising bond yields for Italy and now Spain; the November deadline for the Super Committee; recession news out of Europe; and political tomfoolery from the 17 countries in the eurozone.
Against that, the US and China are growing better than expected while even Japan revealed this week that its growing at an annualised rate of 6%. At home, the Reserve Bank of Australia (RBA) has woken up and is cutting interest rates that should help those stocks beaten up by both high interest rates and a very strong dollar.
Obviously, if you can’t take the heat of the stock market, get out of the boiler room and wait until someone like me says that the worst is over. You could miss the bounce, but on the other hand, this newsletter might just give you the heads up so you don’t miss all of it!
I’m telling my clients that if they can wait for the capital gain from stocks to eventually kick in — and it will — let’s hold good dividend paying stocks and recognize that as long as you can cope with possible capital loss in the short-term, the yield benefits each year will soften the blow. Eventually capital gain will roar back and the losses will be wiped from your bottom line and even your memory.
Finally, recently on my SWITZER program on the Sky News Business Channel, Tom Elliott the CIO of Beulah Capital gave us 18 good dividend stocks and here they are:
1. Telstra (TLS)
2. Westpac (WBC)
3. National Australia Bank (NAB)
4. ANZ Banking Group (ANZ)
5. Commonwealth Bank (CBA)
6. QBE Insurance (QBE)
7. AMP (AMP)
8. ASX (ASX)
9. Woolworths (WOW)
10. Wesfarmers (WES)
11. Coca-Cola Amatil (CCL)
12. Sonic Healthcare (SHL)
13. Orica (ORI)
14. Transurban (TCL)
15. Woodside Petroleum (WPL)
16. Santos (STO)
17. Computershare (CPU)
18. Brambles (BXB)
You can listen to what Elliott has to say about these companies on Super TV.
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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