Forget the leading edge. When it comes to investing, predictable companies will produce better returns, says David Winters, CEO of Wintergreen Advisors in Milwaukee, WI, and manager of the Renaissance Global Markets Fund.
In particular, he favours companies that cater to basic, everyday needs. He finds these businesses offer the most value and stability, and that they’re less subject to volatility in the markets.
“We’re interested in repeat human behaviour,” he explains. “[We know] people are hungry all the time, so we own shares in Nestle. People are thirsty, so we own Coca-Cola. People want to go to the pharmacy and get another Starbucks.”
He adds, “We like good, stable, well-run companies with good balance sheets, and stay away from hype.”
When looking for businesses worth investing in, he considers companies with good or improving economics, as well as management that are focused on creating value for all shareholders.
To assess management, for instance, he looks at their decision-making track record, and at how they’re compensated—he prefers executives get incentives for creating long-term wealth for investors.
And despite global market turmoil, there are good places to invest. Now, says Winters, is a great time to buy equities.
“Prices are low because people are fleeing into bonds at 1%. You can get dividend yields on many stocks of 3%-to-5%.”
He sees numerous opportunities across the globe, particularly in Switzerland.
“It’s a small country; it didn’t join the EU, and it has its own currency. There are companies based there that do business everywhere. They’re very conservative, the Swiss have good laws, and it’s a comfortable place to do business.”