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Monday, February 22, 2010

the timeless portfolio

Over the weekend, tragedy struck, and as tragedy usually does, it puts in perspective just how helpless we truly are. No matter how much we try to control things, we can only take step to produce the most favorable outcome. After that, its god's will.

This got me thinking about a 'timeless' portfolio. A portfolio that would last, outperform and one that would not require multiple trading. Just minimal homework to ensure the companies continue to produce smartly and efficiently. Its a tight concentration of stocks that have high dividends and are inexpensive enough to outperform due to their management culture and product positioning to benefit for the long long-term.

The stocks include:

1. KMP - high yielder. Will benefit from the increased energy usage.

2. NAT - high yielder. Will benefit from continued globalization, and improve global economic prospeects.

3. BKE - a hidden high yielder. The company has a normal 2.7% annual dividend, but since (the fantastic) management team owns so much of the company they have consistently dished out a 'special' dividend year-after-year. With this special dividend, BKE has consistently yielded about 8% a year.

4. IBM - Its yield is a joke, at 1.7%, but IBM has positioned themselves beautifully with a multi-product assault for the mid-to-long term. We already got a glimpse of their product benefit in the Jan. report.

5. F - Its a whole new culture at Ford. Mulally has been doing a tremendous job streamlining the business. Ford is also seeing huge benefits from Toyota's pain, and the fact that it is the lone US survivor. It is still in the transition phase, but with the trajectory continuing to be very positive, and as these benefits from the streamlining fade, Ford will be a solid great US company that will increase their dividend. (But that will happen in a few years, after its stock has passed 20.)

There are plenty of other companies that I really really like as long-term holdings, that will do very well. But the above names are simple, straight forward, yield very nicely and not held hostage to cyclical trends. They will benefit from continued economic recovery, economic growth, (company specific/product) secular growth and have a minimal negative downside. Their culture of management has consistently performed, continue to perform and allow an investor to truly 'buy and hold'.

If I could produce a 401k with just the above 5 names I would. If I was ever in a position to not be able to trade for an extended period of time, all my cash would be in these 5 names.

(But remember, i'm an anonymous blogger, and should not be taken seriously.)

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