“Our favorite holding period is forever.”. Warren Buffet
Things are not always what they seem. Even Warren Buffet who espouses the concept of holding forever has raised cash to over 30% of his company’s portfolio. The threat of tariffs has led to an increased trade deficit as companies took delivery of goods in advance of the tariffs. At the end of February, the Magnificent 7 stocks lagged the performance of the 493 other stocks in the S&P 500. Year-to-date the Magnificent 7 under-performed the other stocks by more than 12%. Not that long ago you were told you better not miss out on the AI boom. Today people are looking at valuations. We have tried to avoid commenting on tariffs as we do not have enough information to make an informed decision. How long will they last? Will there be a counter tariff? I looked at the market in 2020 and saw the markets rise almost 20% in three months while store shelves were empty and people learned to work from home.
We continue to focus on purchasing companies with what we believe to be solid long-term prospects. We tend to prefer dividend paying stocks that continue to pay income despite the market fluctuations. One factor we like is not just the yield, but the potential for the company to increase its dividend over time. As you have seen throughout this commentary it is difficult, if not impossible to make a good decision on the markets regarding the tariffs. That said, we will hold on to companies with solid earnings and a history of increasing dividends.
