The Secrets to Investing in Uncertain Times

By Matthew DiLallo - October 28, 2012 | Tickers: AAPL, FDX, DIS, WM | 0 Comments

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For the past few weeks I’d been wracking my brain trying to decide what to get my dad for his birthday.  What exactly do you get the guy who’s always been there for you and who has everything.  In my thinking of what to get the person who deserves only the best I was reminded of some of the priceless advice he’s given me over the years. 

Great men are those that are driven by core principles from which they never waiver and my dad was driven by three in particular: Honor God, love your family and serve your country.  These guiding principals have enabled him to live a happy and fulfilled life.  As I started to ponder them, my mind of course drifted to investing as it often does.  While my dad wasn’t much of an investor, his philosophy of life has shaped how I invest and they’ve become my secrets to investing in uncertain times.

Honor God

My dad is an ordained minister and his faith defines him.  It’s a faith that remains above reproach both ethically and morally.  It’s a faith that if my dad were an investor would guide his investment decisions.  It’s a faith that I share and one that guides mine so that I look for companies that stand for more than just making a buck. 

Investing in ethical companies is an important way to ensure the company can make it through a rough patch.  One way to find those deemed best is to peruse the list that the Ethisphere Institute puts out each year of the “World’s Most Ethical Companies.”  Making the list five times now is Waste Management (NYSE: WM). 

Not just a garbage collector, the company behind the “Think Green” motto actively pursues projects that benefit their shareholders, the communities they serve and the environment.  Whether it is by using the waste they collect to power more than one million homes or converting 1,000 of their trucks to run on natural gas, Waste Management is committed to being a good steward.  They’ve gone so far as to set aside 24,000 acres of their land to nature preservation and have 73 of their sites certified by the Wildlife Habitat Council.  Many of these initiatives were not simply costs incurred to get their name on a list but truly added value to shareholders.

Love Your Family

As devout as my dad is with his faith, he’s equally devout as a family man.  Investing in companies that promote family experiences would be high on his list.  That’s probably the one reason why I’ve been a Disney (NYSE: DIS) shareholder for about as long as I’ve been investing.  With their media networks and family friendly programing, parks and resorts, and a myriad of consumer products Disney has something for everyone. 

For Disney though it’s not just about being on the receiving end of a family’s disposable income, it’s about making the world a better place.  In their 2012 Citizenship Report they list three core principles that guide them; I want to point out the last two:

CHAMPION the well-being and happiness of kids and families in our endeavors.

INSPIRE kids and families to make lasting, positive change in the world.   

Some of the tenants they developed included responsible marketing, promoting health, encouraging compassion and nurturing creativity.  The results of this pattern of promoting family has been a stock that’s up 178% over the past decade simply smashing the market’s 59% return over the same period.   When times get tough families tend to realize what’s important and spending an evening in watching a Disney movie will continue to pay dividends for decades to come.

Serve Your Country

Not only is my dad a man of faith and family, but my dad was also a soldier.  His love for this country is humbling.  I think that’s why I’m drawn to companies that are great American success stories.

What’s made them great is not just their financial success but what got them there, namely their focus on serving the customer.  Take FedEx (NYSE: FDX) and Apple (NASDAQ: AAPL) which ranked 7^th and 3^rd in the 2012 Customer Service Hall of Fame. Both companies have leveraged exceptional customer service to great returns.

The story of FedEx is one that should encourage every student to give your all and never give up.  The idea behind the company was one that founder Fred Smith originally submitted for a class paper while he was a student at Yale.  The professor thought it was “C” grade work but Smith eventually turned it into a multibillion dollar enterprise.   

One crux of his thesis was a commitment to customers which still is evidenced today by the “excellent” rating they received on the 2012 list.  Not only that but they’ve often been named one of the 100 best companies to work for which demonstrates their commitment to their employees as well.  Since going public shares are up a mind numbing 8,500% showing that Fred’s idea was more than average. 

Meanwhile, Steve Jobs’ story is one of perseverance.  You know the that story well, after being fired from the company he founded only later to return and create one of the world's most valuable companies.  Their success is in part because customers love their products and which our built with them in mind.  This has created a fan base that keeps coming back and expanding with each product upgrade.  Shareholders have been rewarded to the tune of 16,700% returns over the company’s history.  Apple is a great American success story where serving the customer has led to great things for the company. 

Solid Foundation

While none of these companies have had a perfect history, they are those who embody a culture that is less focused on self and more focused on the greater good.  That culture has enabled them to survive and thrive when dealing with uncertainty.  I think my dad would have been a great investor if he had the time.  Luckily for me I can invest with confidence knowing that his tried and true principles will guide me through the uncertainty that always lies ahead. 

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