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Ken Fisher
Ken Fisher, Contributor
28-year Forbes columnist, money manager and bestselling author.
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3/27/2013 @ 10:00AM |13,945 views
Apple And 7 Other Sit-On-Your-Hands Stocks
This story appears in the April 15, 2013 issue of Forbes.
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What is the most common investor mistake? Trading–getting in and getting out at all the wrong times, for all the wrong reasons. You’ve heard it before: Most investors are their own worst enemies. My dad taught me this investing axiom at an early age. In fact, Dalbar Inc. documented it recently in a report available online called “Quantitative Analysis of Investor Behavior, 2012.” Google it, and you’ll see evidence from a 20-year study.
Most mutual fund buyers, for example, badly lag the very funds they buy (and sell) because of bad timing. The average mutual fund holding period for equity or fixed income is only about three years. It’s too short. Moreover, in the last two decades, stupid switching into and out of funds has cost equity fund holders more than four percentage points in annualized returns and bondholders even more–nearly six percentage points.
The solution, of course, is to trade less. Buy into good, well-researched companies and then wait. Let’s call it a sit-on-your-hands investment strategy. Here are hand-sitters for consideration.
Britain’s HSBC Holdings (HBC,54) has few rivals when it comes to providing broad, global financial services to small and midsize businesses. It trades at 15 times trailing earnings, 1.2 times book value and 4 times cash flow, with a 3.7% dividend yield.
Apple (AAPL, 461) is no longer beyond criticism. I like that. The world’s largest stock, it has a P/E of ten and sells for 3.3 times book value and 7.4 times cash flow. Its dividend yield is 1.8%. It’s a bargain among megacap tech stocks like IBM, Google, Oracle and Microsoft, and it’s a bargain among megacap consumer stocks like Amazon.com, Comcast, Disney and Nestle. Use Wall Street’s hypercritical mood toward Apple as a buying opportunity.
Another big company worth buying is Visa (V, 160). It’s in financial services and consumer services. It is also a strong technology play. Visa accounts for nearly half of the world’s credit- and debit-card market. Think of it as a highly skilled funds-transfer firm with a giant global brand. Buy this stock and you can’t help but “follow the money” around the globe. It’s not cheap on fundamentals (it sells for a P/E of 50) but is definitely a buy-and-hold candidate.
Inditex (IDEXY, 26) is an enigma. Its $88 billion in market capitalization is Spain’s largest, but it is a little-known giant. It happens to be the world’s biggest fashion group, and its founder, Amancio Ortega, is No. 3 among global billionaires. You’re most likely to know its Zara clothing store chain, but Inditex boasts many other thriving brands. Far from cheap at 27 times trailing earnings, it’s likely to become a darling of this bull market’s later stages as folks discover a new love.
Troubled Spain is also home to one of my other favorite megacap stocks, Banco Santander (SAN, 7.3). Earnings are depressed, but they’ll bounce back. At 1.1 times annual revenue I bet it earns a dollar a share in 2014 and generates more than 8% in dividend yield.
Special Offer: We asked some of the most successful investors in the country to name their #1 pick for 2013. Get details on their top 10 stocks in this free report, Forbes Top Stocks: 10 to Buy Now.
Italy’s largest integrated oil producer is ENI (E, 47). It has a footprint that spans the world, including sizable operations in Africa, Russia and the Middle East. It has more exploration potential than its peers, yet it sells at 50% of revenues, 1.1 times book value and 11 times my estimate of 2013 earnings–with a 4.5% dividend yield.
My fixation has been on big caps, but two rising midcaps, both in the disk-drive business, still look good. I recommended Western Digital (WDC, 48) on Jan. 16, 2012, at $30, and Seagate Technology (STX, 35) on June 6, 2011, at $17. Buy a half-position in each. They’re both cheap at about 4.5 times trailing earnings and 80% of sales. Seagate offers a rich 4.3% dividend yield, and Western Digital yields 2.1%. Think of these companies as oligopolists in the growing disk-drive business. Without data storage the world goes nowhere fast.
Money manager Ken Fisher’s latest book is Markets Never Forget (But People Do) (John Wiley, 2011). Visit his home page at www.forbes.com/fisher.
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Ken Fisher has been writing the Forbes Portfolio Strategy column for over 28 years and is the fourth-longest running columnist in Forbes' history. He is also founder, chairman and CEO of Fisher Investments, an independent money management firm based in Woodside, CA, which manages tens of billions of dollars and serves tens of thousands of high net worth individuals, foundations, endowments, and large pension plans. He is the author of 8 books, 5 of which are national best sellers. Ken Fisher started writing his monthly column in 1984, the same year he gained international attention for his book Super Stocks, which popularized the price-to-sales ratio. His writing for Forbes was commemorated in a book published by Wiley in 2010, The Making of a Market Guru: Forbes Presents 25 Years of Ken Fisher. He was honored by Investment Advisor magazine as one of the industry's 30 most influential individuals over the last 30 years (Thirty for Thirty, May 2010). Ken Fisher resides in Woodside, CA, with his wife Sherrilyn. He is currently ranked No. 263 on the 2011 Forbes 400 list of richest Americans. For an archive of past columns, visit: http://www.fi.com/forbes
The author is a Forbes contributor. The opinions expressed are those of the writer.
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