A Value Investor's New Year's Resolutions

by: Baskin Financial Blog

By Barry Schwartz

1)I will try to consume less financial news media. A steady diet of CNBC, BNN, WSJ, FT, FP, G&M and lots of unhealthy blogs has left me bloated and sluggish. I will try to remember that the scary daily headlines and ramblings of those who don’t know any more than me are just noise that distracts my focus. I will continue to exercise my judgment and base my decisions on fundamental data, not speculation.

2)I will not mimic any index or benchmark. The S&P/TSX index continues to be a poor measuring stick. With close to 80% of the index allocated to three sectors, energy, materials and financials, the index is fraught with high risk. I will diversify my client’s assets and limit their exposure to any one sector or any one company.

3)I will remember that companies that pay dividends will be the cornerstone of my client’s portfolios. I will not forget that companies that have a history of raising dividends offer me the best source of insider information. A company that raises its dividend, signals to investors its confidence for the coming year.

4)I will resist the urge to market time. I will not forget that most of the year’s profits only come from a few trading days and since I don’t know when the next big up days is, I will have to sit tight. My decision to buy or sell a stock will not be based on whether the market is going down or up. My decision will be based on valuation.

5)I will not forget that I am a long-term value investor. Sometimes value and price can get disconnected and stay that way for an extended period of time. I will continue to remember that my best investment decisions are made when values are the cheapest.

6)Finally, I will resist the temptation of group-think. I will continue to challenge my assumptions daily and surround myself with colleagues and clients who can do the same.