There are plenty of golden quotes of investor legend Warren Buffet from which each and one of us can learn a lot about investing and doing business.
Seeing stocks as pieces of businesses or bringing the analogy of investing into productive farmland has been crucial for me to focus on the enterprise behind resp. represented by a stock. As a long term oriented buy and hold investors it’s essential not to look primarily at the price fluctiations but at the fundamentals of companies.
I like to look at my stock portfolio as a kind of mini-business. Each holding position is like a machine or a product generating cash flows. Let’s take my stocks of French beauty company L’Oreal or spirit companies Pernot Ricard and Campari. Or let’s look at tonic maker Fevertree or Swiss chocolate giant Berry Callebaut. Each year, these busines stocks – as a group – churn out more money in form of dividends. It’s the consumer defensive positions a Dividend Growth Investor wants to put at the core of his or her dividend growth portfolio. Adding some higher yielding stocks here and there from the commodity and insurance sector boosts the cash returns.
Every business man or business man has to manage scarce resources, allot them wisely and take calculated risks from time to time. It’s about avoiding failure as much as possible but also seizing opportunities. It’s about having a vision and positive perception about the (business) world. That’s exactly the trait of an investor when he or she constructs a stock portfolio.
Like a business, a stock portfolio needs to grow, to become more productive over time. And like in the business world it’s about avoiding complacency, about overcoming emotion, about keeping consistent. If you want to be successful, no matter in what area, you need perseverance and a whole lot of patience. It’s seldom about luck.
And like The Coca Cola Company makes product innovations, enters new markets and launches new products, a dividend investor has to add new positons from time to time to further strengthen his or her mini-business.
As an investor, it’s important to adapt and to see new trends. The same in the business world.
Why can we see company stocks of behemots like Amazon, Facebook and Alphabet or Square in many dividend growth investors portfolio? Because these are the kind of enterprises that will dominate in the business world. And as an intelligent investor you want to own pieces of these wonderful businesses. Who cares that currently they don’t pay out any dividend?
As an investor you want to position yourself as best as possible. And you have some vision about the future. Several tech companies will pay out dividends in just a couple of years. And it will be hugely rewarding for their investors.
It’s like a company that invests into new product lines, well knowing that these will be the stars in the future and step by step add to the current “cash cows”, such I like to see my current dividend growers (such as Mc Cormick, Mc Donalds etc.).
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.