My grandfather was a Texas oilman. A few times per year, he and the other employees were awarded stock in the company they worked for. It was a bonus. Often it was a few shares. And on those days, when the employees would gather in the cafeteria for lunch, my grandfather would offer to buy shares from anyone who wanted to sell. I can’t say whether he was a particularly shrewd trader, but he knew what the stock was worth to him, and I’m sure he got a good deal. In that way, he accumulated a block of shares over time and the dividends gave him extra cash flow in his retirement.
Once he bought shares, my grandfather never sold. He could have. Any contemporary investor certainly would have, if for no other reason than to diversify. Looking at a chart of the company he owned, there were periods when the value of his holdings went down 50%. Many investors probably would have sold shares during one of those occasions when oil prices, and oil stocks, tanked (remember oil at $10 per barrel in the 1990s?). But, my grandfather didn’t sell even in those periods; the company was worth more to him, as was the consistent stream of dividends the company produced.
Most investors (including most advisors) treat the stock market like it’s a game. They jump on the bandwagon for popular stocks, then dump their holdings at the hint of economic trouble. Having a liquid and electronic stock market makes buying and selling shares easy. But just because we can sell, or buy, doesn’t mean we should. And that’s where my grandfather’s philosophy was a benefit. He recognized there was a real company behind the shares he was buying. That company made products he knew were important, and he respected the company’s history, employees and leadership. And his “stock market”—the cafeteria where he and his coworkers struck handshake deals over coffee and corned beef sandwiches—may have been simplistic, but it definitely was not a game. And what Wall Street analysts thought of his company, or what the Dow did each day, could not have been less important to him.
Election years tend to be volatile for the markets. Investors everywhere, every day, react to the latest news and polls, driving stock prices higher one day and lower the next. And this election year, more than any other, has Americans anxious about the outcome. But during times like this, we should remember that we are investing in great businesses, and great businesses share common traits. They are often the best or only company that does what they do. They are highly profitable. They are financially strong. They have skilled management teams and they retain their customers, even during difficult times. Elections don’t determine the future of companies like these; they serve their customers, their communities, and investors for decades, which is why owning them and holding them is the best long-term investment strategy.
~ Travis Raish, CFA