Today I added IBM, GE & INTC to the contrarian or value portion of the portfolio. Bringing that strategy to an overweight position of roughly 36%, just behind International which accounts for 40% of the portfolio.
All seven contrarian stocks (DIS, GE, IBM, INTC, SBUX, VZ, WMT), as the name contrarian implies, are out-of-favor…but I don’t own these just because I’m a curmudgeon. These stocks are not just “cheap”, they are:
- High quality “blue chip”…many of which are DOW components
- Solid balance sheets
- Reliable dividend payers
- Resources to take advantage of near term technology trends…provided management executes properly
- Likely to appreciate in value over the long term and I’m content to collect the dividend until they do
That last point plays to my long standing avoidance of owning bonds, due to the interest rate risk. If interest rates ever “normalize”, then bond funds will lose principal. So I plan to sidestep bonds until the 10 year Treasury gets above at least 3%. Owning blue chip contrarian stocks is a value play that offers exposure to equities, delivers fairly reliable income and provides a degree of “safety” (sound fundamentals with price-to-earnings ratios that are substantially below average).
Are some of them dogs? No doubt, but sometimes dogs make good companions. [NOTE the picture of me and my best friend…striking resemblance isn’t there?]
Even IBM has the potential to harness the computing power of WATSON. In a worst case scenario with IBM, firing their CEO will likely give the stock a 10% bounce…don’t feel too sorry for Ginni, she has a platinum parachute.
The Robots are Coming: A Human’s Survival Guide to Profiting in the Age of Automation available at AMAZON and all fine bookstores.
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