The Golub Group

Stock investing should be viewed as old-age insurance. Stocks are serious business because, for most of us, how we handle them will determine how we will be able to live in our later years. The challenge of living comfortably for the rest of our lives has become more of a challenge as the Prudential Life Insurance Company has recently pointed out that the first human to live to 150 years old is alive today. The Wall Street Journal reported in its March 19, 2013 issue, that many workers are saving too little to retire.

High-quality businesses that have the ability to pay and increase their dividends are even more attractive in this low yield environment and the valuations of these businesses are cheap on an historic basis and relative basis to the alternatives.

What does it take to achieve a secure retirement? We all have many goals, financial and otherwise, but securing a comfortable retirement is one we all share. It doesn?t matter if we are in our twenties and just beginning our professional lives or if we have already been enjoying retirement for 20 years. What does matter is, have you defined what is important to you, what you will need, what you want it to look like? Have you done a thorough assessment of your current situation and what you?re doing to improve it? The time to start thinking, planning, and acting on this is NOW.

If I have learned anything of value in my 45 years in this business to share with all the people I care about, it is that the next few years will prove to have been one of the best opportunities in history for investors to hold and/or to buy the largest, strongest, and best dividend paying blue-chip businesses.

Volatility in the markets is a gift to investors. It doesn't hurt anyone unless they sell at points of weakness or buy at points of ebullience. Indeed, volatility can be the friend of the investor who understands the difference between price and value, and who has the courage to buy when the market signals fear and sell when the market signals complacency. Our job as investors is to take advantage of this knowledge: to recognize the difference between fact and fiction, truth and emotion, and to build conviction and exercise good judgment in the face of volatility.

Today, we are at a point when the public is extremely pessimistic about the outlook for stocks, leading to very low public participation and the lowest valuations (when compared to bonds) in 60 years. The stock market is not about news. The stock market is about mass human behavior. We recommend you do what we are doing now, and buy the asset class for which public expectations are far too low ? blue chip high dividend paying stocks.

Four main factors will help provide capital gains for blue-chip stocks over the next few years. The first is an over-inflated bond market, which will cause poor returns down the road. The second is a slow but steady return to an economy which has recovered to normal employment levels. The third is that corporations have more cash on their balance sheets than ever, and will use this cash to grow their businesses and hire new employees. The fourth is that due to cost-cutting and improved efficiency, leading corporations will show improved profitability, earnings and cash flow growth.

How do you create and nurture a truly great company culture? The answer is outstanding ingredients. That is the secret of great wines and also of great company cultures. The people the company draws to itself reflect the values of the company.

One investment strategy stands above all others, and that strategy is to buy shares of enduring businesses at discount prices, and to wait for the underlying value to be reflected in the stock price. This is the long-term strategy followed by successful investors such as Warren Buffett and Benjamin Graham. Even though the principles of this strategy are simple, most people lack the essential trait required to follow it to success: the ability or willingness to ignore the short run.

Blue-chip multinationals now face some of the best opportunities we have seen in decades, supported by high corporate cash levels, strong free cash flow generation, expanding profit margins, manageable debt levels, relatively little need to access capital markets to fund growth, attractive valuations, sound management teams and the ability to capitalize on global growth, particularly in emerging markets. Disciplined focus on business fundamentals will be crucial to investor success.