Topics: stock markets, shares, defensive shares
Dear Reader,
Our unofficial mandate at The Fleet Street Letter is to protect you against the madness of crowds. When markets get carried away and “overshoot” as they invariably do, there is, sooner or later, a consequence that affects us all.
In 2007, after four years of relentlessly rising markets, cracks started to appear. And in 2008 the bubble burst in spectacular fashion following the Lehman Brothers collapse.
Going forward, inflation, value and ‘bubble-blowing’ government policy all worry The Fleet Street Letter team. Let me explain…
It’s not impossible that markets could mimic their 2008 capitulation. A V-shaped recovery is “priced into the markets” according to one banker at Morgan Stanley. That means that if the economy doesn’t jump straight back into growth, stocks will fall. The next three months will tell us whether the bulls or bears have it right.
The question is: What is the best way to play it? Stocks? Bonds? Funds?
Our answer, what is ironically the most contrarian advice, is to diversify.
How to manage your risk
You see, one major shortcoming in so many investors is small-mindedness. By blindly investing in the same old fare, time after time, investors are failing to manage risk. It’s dangerous the way investors gang around one single approach to investing. No doubt you’ve seen it yourself:
- Small cap investors loathe blue chip investors;
- Fundamental analysts pour scorn on chart followers;
- Stock pickers hate fund managers;
- Traditional fund managers despise hedge fund managers
- And so on, ad nauseam…
These turf wars are frivolous and (something many investors don’t seem to have realised) you don’t have to pick sides! Ignore the stock market fascism and be more open-minded as there’s nothing stopping you investing any way you see fit. After all, it’s your money!
Consider the world’s most consistent and wealthiest investors – Warren Buffett, John Paulson, George Soros, Paul Tudor Jones, etc. What all these investors have in common is that they do not discriminate. They see the big picture and invest in the best idea at the best time in the best way to make the most money.
How we pick stocks at The Fleet Street Letter
Right now, we like defensive shares…
We like companies that offer high yields, stable earnings and strong balance sheets. And when you’re talking about defensive, you have to mention British American Tobacco (ticker: BATS). Tobacco has been the FTSE’s most defensive sector and BAT its most defensive position.
BAT makes more than half its profit from emerging markets, ensuring diversification. Plus, in some developed markets it dominates – think Canada, South Africa and Australia. To cut costs, it is “centralising” management, marketing and production. It has a strong balance sheet and pays high, growing dividends. The weak pound is currently a benefit but could soon become a threat should sterling recover.
Tesco (ticker: TSCO) is another defensive we like. As if you didn’t know, it’s the UK's leading food retailer. It towers over the industry with over 20% market share, growth is driven by non-food and e-commerce business. Abroad, Tesco is growing too. It has a strong brand in Ireland, Central Europe and Asia.
We also embrace the best growth stocks…
Inmarsat (ticker: ISAT), the satellite business providing communications services, is not only growing earnings in high double figures. It’s also at the end of its research and development cycle. You see, Inmarsat completed a seven-year capital spending programme in 2007. Now the group is entering a spell that the directors are describing as a cash flow harvesting period. It’s not cheap, but nor is any growth stock in this climate and these types of positions are essential for maintaining the right dynamic for the portfolio.
And now for something slightly different
In the current climate, investing in stocks alone is a bad policy.
This is a lesson of the credit crunch that many investors, and indeed many brokers and fund managers, have failed to learn. As such, they are likely to repeat history’s mistakes.
Gold is a fine hedge to hold in your portfolios, as we have repeatedly said here in The Right Side. We’re long gold in The Fleet Street Letter.
Another asset that all investors should consider is corporate bonds. Safer than stocks and paying a higher yield too. The common criticism is that bonds have less potential to rally. But try telling that to our readers who have so far secured a 25% rise since our corporate bond recommendation some months ago. And that’s before considering the 7% dividend.
It’s this diverse approach that helped us to record gains in 2008. While all stocks were falling, we were invested in European bonds and non-stock funds that were gaining. We play the stories and sometimes the stories are not limited to the stock market.
It’s exactly this philosophy that has steered the team for 71 prosperous years.
Best wishes,
Theo Casey
For The Right Side
Editor’s note: Theo Casey is the investment director of The Fleet Street Letter, the UK’s oldest standing newsletter. For over 71 years The Fleet Street Letter has been providing accurate, critical forecasts that have helped readers secure their long-term wealth and profit from “inner-circle” investment opportunities.
Having foreseen numerous global and economic events and their impact on the market – the Asian crisis, the dotcom bubble, the crash in sterling, the subprime housing crash and the ensuing credit crunch – The Fleet Street Letter now turns its attention to the events they see unfolding right now.
Invest along side this savvy inner circle and discover the steps you need to take to protect your retirement funds, investments and property against a weak pound, a stagnating UK property market and rocketing energy prices.
Get The Fleet Street Letter for as long as it is published – without ever paying subscription fees.
You’ll secure The Fleet Street Letter “for life” as a member of our limited Alliance package. Not only that, but you’ll also receive Red Hot Penny Shares, The Bulford Files, Profit Hunter, Dr Mike Tubbs' Research Investments and The Zurich Club. Plus 14 special investment reports.
This offer closes on 19 November at midnight. YOU HAVE ONLY EIGHT DAYS LEFT TO JOIN.
Click here for full details NOW.
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
