The stocks an investor owns are not just islands unto themselves within a portfolio. Often times they are intertwined in ways we don’t usually consider.
Almost like a hockey team – some playing offence, some playing defence, and some paying dividends with intangible contributions beyond the scoresheet.
It’s a good exercise for investors to think of the companies they own as closely related cogs powering the global economy.
John O’Connell, Chairman & CEO of Davis Rea Investment Counsel, gives some good examples in his monthly letter to the firm’s clients.
All the companies that you own have now reported earnings for the quarter ended March, 2021.
These companies continue to navigate well the various challenges that have beset the world since the outbreak of the Coronavirus early last year.
It is a testament to the strength and creativity of the management teams and the products and services they deliver to their customers.
Our goal is to always invest in the best companies in the world, stick with them and watch them grow, all the while keeping an eye on the horizon for trouble.
There are no changes to our long-term positive outlook for the companies which we have chosen for your accounts.
As always, there are company-specific issues that must be navigated, but the general economic backdrop for continued global recovery continues to be a positive tailwind.
Now the fun part – and why we own the following companies:
Reading the news on your Google news page, or seeing your friend’s new kitchen posted on Facebook, you feel like you should do something too with all the money that keeps showing up in your bank account.
You take that deposit and give the money to your local Home Depot, and they give you a new lawnmower from Stanley Black & Decker.
Or you buy a new iPad from Apple, paying for it with your Visa card, and have FedEx deliver it to your door.
Your new iPad is fantastic, so you watch the most recent Disney movie and while watching, you order McDonald’s for a snack.The people from McDonald’s are all wearing uniforms and washing their hands with sanitizer delivered and made by Cintas.
Cintas recently has been buying smaller competitors suffering from the pandemic.
J.P. Morgan, Bank of America, Citibank and PNC Financial provide banking loans to all of Cintas’ suffering competitors.
The banks politely suggest that for the sake of keeping the loans in good standing they should sell their business to Cintas.
The banks are especially pleased because they get a bad loan off the books and get paid to do it.
Cintas hires Accenture for advice on how to integrate the businesses they bought, and Accenture suggests Microsoft’s productivity software hosted on Amazon.com’s cloud servers.
Cintas buys Covid testing equipment from Thermo Fisher Scientific and adds United Health Group benefits to all their new employees so that they can get a hip replacement from Stryker.
Stryker uses Rockwell Automation software and robotics to make the hips in a safe and clean environment.
Rockwell has lots of trade secrets the Russian and Chinese hackers are trying to steal, so they use Raytheon’s cyber security software. Cool, huh?
The stock market will do what it does. The governments will do what they do. The press will scream as loudly as they can to get your attention, and interview experts like us to try to make sense of it all.
The companies you own will ignore it all and go about their daily business.
Are stocks overvalued? There are a lot of stocks in the world. You own amongst the best in the world, and they are doing just fine and will for a long time.