We’re living through a golden age. I’m sure of it.
“It’s such a drag when you’re livin’ in the past”
– Tom Petty, Even the Losers
One thing that bugs me about people around my age and older is nostalgia. I love talking about the old days. It’s fun, but it has got to stop somewhere. Reminisce a bit about the past, learn from it, and move on. Life happens now and moving forward, no matter your age.
I wish I could find the source and exact wording of this quote, but I recall a reporter or somebody asking a New Yorker “which New York” they thought was better – present day (this was like 15-20 years ago) or New York in the 90s or 80s. The response was perfect. Paraphrasing:
Every generation ends up thinking the New York they grew up in was better. So you always think a version of New York that came before the present New York was better unless you’re the one actually doing the living in it.
On the other hand, endless negativity can be worse. The market crashed in 2000. It did it again in 2008. It’s no different today. Even though, it is.
At the same time, no matter where you fall on the political spectrum, you probably think things stink today. From my perch (for the record, far on the left), it’s true. From racial to environmental issues and the pandemic to the upcoming election, I have seen nothing worse politically and socially in my lifetime. People with a few years on me might think differently. Or maybe not.
But this isn’t the discussion I want to have.
One thing I have done to become a better investor is compartmentalize my thinking. I used to let my political and social emotions seep into my investing.
I said emotions, not opinions for a reason.
My opinions still influence my investing. There are certain companies I will not support (or invest in if it’s an available option) on the basis of how I see the world politically and socially. However, I no longer allow the emotion I feel as I observe political and social events unfolding to impact my investment decisions. At least not to the extent I consciously have control over the relationship between emotion and decision making.
Just because I’m uneasy about the world doesn’t mean I have to be uneasy about investing. I see stocks, particularly of today’s most essential, relevant, and cutting edge companies (as well as strong dividend payers), going up irrespective of who wins in November or who is in the White House four or eight years from January 2021.
During this largely bull market, we have lived through all sorts of policies and policy tweaks, changes, and reversals. We all have our opinions and concerns attached to them. However, great companies, ultimately, don’t care.
Great companies deal with the cards they’re dealt. Because what they’re doing matters more than the things happening around them that they, ultimately, can’t control. In fact, three of the greatest companies of the present generation – Apple (AAPL), Amazon.com (AMZN), and Starbucks (SBUX) – by and large – wear their sociopolitical perspectives on their sleeves. They wrinkle feathers more than they lobby.
These Companies Also Matter to Consumers Now More Than Ever
When you look back on the “accomplishments” of iconic companies of the past, they almost seem small compared to what’s going on in the present day. Relatively speaking, Ford (F) creating and facilitating suburban development for some of its workers and Americans across the country pales in comparison to the transformation of life brought on by Apple, Amazon, Starbucks, and others.
This is why valuation doesn’t spook me as a long-term investor.
Apple transformed the way we buy and consume content, starting with music. You can talk about anti-competitive practices all you want, however, there would not be, say, a Spotify (SPOT), or at least not as solid and aggressive of a Spotify, without Apple.
Amazon made e-commerce a way of life. Without Amazon, do you think Target (TGT), Walmart (WMT), and Best Buy (BBY) would have stepped up their games the way they have? It took an innovator to make companies less likely to innovate step out of their relative comfort zones.
Starbucks, certainly, taking pages from Apple and Amazon, married digital and mobile with its blend of grab-n-go and local coffeehouse knock off, sit and linger third place. I honestly don’t believe Domino’s Pizza (DPZ) would have accomplished what it did over the last decade or CVS Health (CVS) would be ramping up its hyper-ambitious plans today if Starbucks had not laid the groundwork.
There’s more synergy within our great companies and between great companies now than there has ever been.
You can extend the aforementioned logic and connections out to a whole slew of the most innovative and essential companies that tend to dominate today’s mostly bull market. I didn’t even get into companies that own and/or distribute content or the firms that provide the technological backbone in areas such as distribution and security. The interrelations are endless.
What Does It Mean for Investors?
It feels obvious. It’s easier to ignore the noise today than it was in 1999/2000 and 2008. If the housing market collapsed tomorrow (and that doesn’t seem like even a remote possibility), I don’t think I would worry about most of the stocks I own, like, or admire. Outside of banks and home builders, I would barely blink an eye. I’d buy more stock.
Because today’s stock market leaders stand on their own and play off of one another so well. They play off of one another competitively. They make one another better. Sometimes, they partner (e.g., Apple and CVS). External forces don’t matter as much as they once did.
To some, this seems like an aggressive approach. As if I’m eschewing risk. While I don’t consider this the case, I believe in checking myself. I check myself with dividends.
If a company pays a strong dividend, I feel more confident in the overarching theme of this article. While this means I miss out on the growth I’m near certain will happen in an Amazon, the dividend tempers my unbridled optimism with some cautious pessimism. But there are all sorts of dividends I’ll buy.
Apple – incredibly company, though low yield, but with a clear path to dividend aristocrat status and much larger increases as it heads in that direction.
AT&T (T) – lots of questions as a company, but management that knows it ways around a balance sheet.
CVS – suspended dividend increases, but maintaining a nice payout amid a potential hyper-growth phase for the foreseeable future.
This is my idea of diversification.
Buying different types of dividend stocks. So, you’re less about diversification by sector and allocation and more concerned with diversifying on the basis of the dividend. I don’t want all dividend aristocrats. I’m okay with a token dividend or two if growth and eventual dividend increases appear on the forefront. You get the picture.
I love going back to it because it’s so true. If you adhere to dividend growth investing, you make your life so much less stressful as an investor. No matter how you view the world or consider the practical and psychological aspects of buying stocks, you can almost always use dividends to feel confident in your decisions.
I always like to have something to fall back on in case I’m wrong in my most bold thoughts and predictions.
Today’s companies are the best I’ve ever seen in my life.
No nostalgia here. I believe this. At the same time, buying a stock that doesn’t pay a dividend feels a lot like running a marathon without the people along the route handing you cups of water. The dividend says a company has arrived. It pays me to wait. It generates a growing source of always important income.
It does each of these things.
But it also provides a level of support as an addendum to my overall feel for the broad condition of corporate America and the stock market.
Disclosure: I am/we are long AAPL, CVS, SBUX, T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.