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Editor's note: Just days ago, Dan Ferris announced that two of his World Dominating Dividend Growers are now in "buy" range. We truly believe every individual investor should own these kinds of stocks... And we believe this is a major opportunity for investors. This week, we're going to share some of Dan's most popular research on this idea.
How to Make a Huge Amount of Money – Safely – in StocksBy
Monday, August 19, 2013
The greatest "secret" in all of investing is hiding in plain sight...
Most people don't know it, but this secret is responsible for a huge portion of the wealth generated by the world's greatest investors, including Warren Buffett.
And if you're like most people, you need the secret badly right now... A lot of folks are still scarred by the 2008-2009 crisis. They're scarred by the 20% drop the market saw in 2011. They're worried we're about to see another big drop in the market.
If that sounds like you, keep reading. I've got the answer...
Ever since late 2008, I have been "pounding the table" on my World Dominating Dividend Grower (WDDG) stocks... repeatedly extolling the virtues of highly competitive, cash-rich businesses with growing dividends. Investing in these stocks allows you to compound your money at high rates over long periods of time.
Part of the message I'm trying to get across to investors is that these stocks are different. They're not like the average stock. And they're not like speculative biotech and mining stocks.
WDDGs are cash-gushing businesses, and competing with them is insanely difficult.
For example, consider Buffett's largest stock holding, Coca-Cola. If you add up Coca-Cola's debt and tangible equity, you get about $37 billion. Do you really think if you had $37 billion, you could create a business that could dethrone Coca-Cola not only as the world's No. 1 beverage brand, but also (according to global brand consultant InterBrand) as the world's single most valuable brand of any kind for the last 10 years? I doubt it.
I've given my 12% Letter readers a maximum buy price on Coca-Cola of $35. It's about 10% over that level now. But as long as the price is right, Coke is a stock you can buy, no matter what's happening in the world. Coke is a stock you buy when you're scared about what's going to happen over the next several years.
With Coke, you don't care if the share price dips. You know it's going to do really well over the long term, thanks to its growing dividend.
Aside from the opportunity to make a lot of money over the next several years... think about the safety of a stock like Coca-Cola. It's got the biggest beverage-distribution capability in the world. No matter what type of new nonalcoholic beverage comes into existence, the best way to get it to the maximum number of new customers as quickly as possible is for Coke to take it over and distribute it.
Every now and then, you might hear someone say that Pepsi is a better business than Coke. And after all, Pepsi is always right on Coke's heels, isn't it?
Well... not really... not from an investor's point of view.
Check this out... Since 2009, for every $1 of earnings it retained and reinvested in the business, Pepsi added $2.85 of market value. For every $1 Coke retained during the same period, Coke added $3.20 of market value.
There's a reason for that. Coke is a better business. It's No. 1. Being the biggest is much more valuable than most investors realize. By definition, it means this business is the most successful in its industry. Odds are excellent it'll continue to be No. 1.
Coke isn't the only such business (though it's one of the best)... We have 11 World Dominating Dividend Growers in the 12% Letter portfolio. We have 11 "Coca-Colas" in 11 different industries. And right now, TWO of them are in buy range. This is a fairly rare event, so it's pretty exciting.
There are lots of No. 1 companies in the world. And lots of companies grow their dividends. But you can't count on a lot of companies to both crush their competition and grow their dividends for decades on end. That's what WDDGs do.
It's no accident Coca-Cola is the largest stock holding of the world's greatest investor, Warren Buffett. He knows the business isn't going to change much over the next several decades. It's just going to keep growing...
Think about it another way, too. Buffett is 82 years old. He owns businesses like railroads and electric utilities. His largest business is the sleepy, steady, inflation-beating business of insurance.
He's building an endowment... an investment that will stay safe and continue to perform for decades after he's dead. That's why Coke is his second-largest stock holding, at more than $15.5 billion.
So if you're like most folks – and you're still scared of the stock market – please consider putting some money into the World Dominating Dividend Growers. That way, you'll beat inflation, compound your money at high rates for many years, and sleep well at night.
If the market drops, you'll have little to worry about. When you're getting a 10% dividend yield on your original purchase price, you don't care what the "market" does. You just keep making more money – in cash dividends – year after year.
WDDGs ought to be the core of your stock holdings. They're great long-term investments... You can always count on them to pay you higher cash dividends every year. And they keep your money safe no matter what happens in the stock market.
Over the past year, WDDGs in the 12% Letter portfolio raised their dividends by an average of 10.4%! A few more years of that will be more than enough to convince you that holding shares of these companies is the wisest stock-market investment you can make for the long term.
I'm glad my publisher sells The 12% Letter at a low price. I truly believe every individual investor ought to own WDDG stocks. Selling the letter at a low price can help it reach as many people as possible.
Right now, The 12% Letter only costs $39 for a year. Anyone can afford it, even a high school student. Come to think of it, it wouldn't make a bad graduation present for a child or grandchild...
So if you want to get past the fear of stocks that's so widespread today and set you, your children, or your grandchildren up for decades of safe compounding, click here to sign up for The 12% Letter (without watching a long promotional video). If you don't like it after four months, you can always get your money back.
If this approach – of buying the world's best businesses at great prices, and compounding for years – is good enough for the world's best investor, it should be good enough for the rest of us.
Good investing,
Dan Ferris
Further Reading:
Porter Stansberry calls World Dominators "capital efficient." They're able to raise prices along with inflation, while spending little on growing and maintaining their businesses. In short, Porter says, "If you want to become truly wealthy through investing... your best, safest choice is to buy these kinds of companies." Get all the details here.
Buying high-quality, capital-efficient companies and reinvesting the dividends is what Porter calls "the single greatest investment secret ever discovered." But most investors don't have enough patience or common sense to pursue this approach. Get "the best investment advice you'll never take" here.
Market NotesNEW HIGHS OF NOTE LAST WEEK
Loews (L)… the "next Berkshire Hathaway"
MannKind (MNKD)… biotech
Rite Aid (RAD)… drugstores
Cigna (CI)… insurance
Cummins (CMI)… high-horsepower diesel engines
ConocoPhillips (COP)… Big Oil
Halliburton (HAL)… oil services
Chart Industries (GTLS)… natural gas storage
Cisco (CSCO)… networking giant
Staples (SPLS)… office supplies
Xerox (XRX)… office technology
Best Buy (BBY)… electronics retailer
CarMax (KMX)… used cars
Goodyear Tire (GT)… tires
Royal Caribbean (RCL)… cruises
Tiffany (TIF)… jewelry
Zale (ZLC)… jewelry
Under Armour (UA)… "sporting" products
La-Z-Boy (LZB)… furniture
Skechers (SKX)… shoes
Family Dollar (FDO)… discount retailer
Tyson Foods (TSN)… meat
Krispy Kreme (KKD)… doughnuts
Yum! Brands (YUM)… Taco Bell, Pizza Hut, and KFC
NEW LOWS OF NOTE LAST WEEK
Hatteras Financial (HTS)… virtual bank
MFA Financial (MFA)… virtual bank
Annaly (NLY)… virtual bank
Stanley Furniture (STLY)… furniture
American Eagle (AEO)… apparel
Taubman Centers (TCO)… shopping malls
Weight Watchers International (WTW)… weight-loss company
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