There are exceptions, and although rare, it looks like we are experiencing one at the time this article was written. Companies such as Home Depot, Johnson & Johnson, Berkshire Hathaway, Target, Wal-Mart, Wells Fargo, etc., are all trading at prices that, relative to most of the smaller equities, makes them much more attractive. How long can this situation be sustained? No one has a clue. The result has been an interesting skewing of many value investor portfolios toward larger companies. Although these businesses haven’t moved for quite some time, owners can wait patiently as they receive their dividend checks.
Ten Part Guide to Beat the Market
By Joshua Kennon, About.com Guide
Generally speaking, it’s better to invest in small and medium size companies than large businesses. The reason is simple: It is ordinarily far easier to grow earnings at 15%+ on a small base of, say, $50 million than it would be on a base of $10 billion. Wal-Mart has pointed out that in order for it to grow at an even remotely acceptable rate, it has to add sales that would, by themselves, create a Fortune 500 company.
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- Simple Steps to Help Anyone Beat the Market
- Keep Turnover Low and Minimize Frictional Expense
- Use the Tax Law to Your Advantage
- Commit to a Value Investing Philosophy
- Avoid Wipeout Risk at All Costs
- To Beat the Market, View It as a Stock
- Pay Yourself First
- Know When to Throw in the Towel and Buy an Index Fund
- In Investing, Smaller is Normally Better
- Know What Risk You Are Trying to Avoid
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