Invest in What You Know
What’s the First Thing You Do in the Morning?
You might turn off your alarm clock, open your blinds or make your bed. But very soon, like millions of other people around the world, you typically need to use the bathroom. And so begins your relationship with consumer stocks. Whether it is toilet paper, toothpaste, cotton swabs or any of the other dozens of products contained in most bathrooms around the world, every morning consumers wake up and begin the process of consumption. Take a minute right now to think about the products you may have already used today to satisfy your basic daily needs.
Consumer Linked Income Portfolio (CLIP) is comprised primarily from companies around the world that satisfy those basic daily needs. We believe there are three primary characteristics that make owning consumer staple stocks attractive: strong financial characteristics, global growth opportunities and a consistent, predictable record of growing income. This last feature is the most important factor used in our selection and screening process as it allows us to have some confidence in our belief that the amount of dividend income we receive in the future is likely to be higher than what we receive today.
You may hear a lot about this sector in falling markets, but we believe it represents a moderate risk approach to achieving superior risk adjusted returns over the long term. You may have suffered significant losses in the most recent economic turmoil and this sector was not immune either. However, as compared to the broader market as represented by the S&P 500, the consumer staples sector delivered a much less volatile journey. And along the way, dividends from many of these brand name giants continued to climb in the face of general economic woes.