KCR’s systematic, evidence-based analytical and investment process is driven by the historical record. Our financial faith resides in what the data shows. Human beings have made the same mistakes in slightly different forms again and again for centuries. Stick to a low-cost, tax efficient process and winning is inevitable.
In our piece Bull Markets and their Consequences, we summarized one of John Kenneth Galbraith’s many wonderful books. KCR finds Galbraith’s prose moving. But this bit seems particularly apt for revisiting:
There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
Get our White Papers direct to your inbox: SUBSCRIBE
And so it was in January 2021. KCR spilled a tremendous amount of ink pillorying the denizens of loss-making IT, novel and overpriced Consumer Discretionary stocks, and pounding the table for Consumer Staples. In our back-to-back initiation pieces, we hammered home the following:
- The importance of dividend-paying stocks during a dividend yield famine & speculative mania
- Consumer Staples’ incredible track record of compounding vs. IT stocks
- Staples had the largest yield advantage over 10-year Treasuries in history despite modest payout ratios
We further amplified the call by adding numerous pieces explaining the benefits of our top 10 ranked staples. Here is what we learned: doing the right thing for readers and investors is horrible business. At best, there was silence. At worst, there was derision, disdain, and redemptions. And we will do it again when the data and evidence demand it of us. Count on it.
Here is how that painful and empirically informed view panned out. We saved some people money and lost a slew of clients. We say this to highlight just how hard and professionally difficult it is to do the obvious.
This chart also motivates the remainder of this work, as nothing good lasts forever.
The Safest Dividend Stocks are Far More Expensive Today than in January 2021
What made us so confident was our work, done nearly a decade earlier into low volatility investing, and our three-part series diving into the puts and takes of dividend investing. As our research into the historical record showed, over the long term, staples are a terrific asset class that tend to benefit from GDP growth with pricing and supple dividend income as well.
Yet our advocacy for Staples being some of the best stocks to buy at the time was tethered to their shocking cheapness. Here is the updated chart of our top 10 ranked staples vs. the market.
The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seek independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction.
Nothing herein shall limit or restrict the right of affiliates of Kailash Capital, LLC to perform investment management or advisory services for any other persons or entities. Furthermore, nothing herein shall limit or restrict affiliates of Kailash Capital, LLC from buying, selling, or trading securities or other investments for their own accounts or for the accounts of their clients. Affiliates of Kailash Capital, LLC may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publication. Kailash Capital, LLC shall have no obligation to recommend securities or investments in this publication as a result of its affiliates’ investment activities for their own accounts or for the accounts of their clients.
© 2022 Kailash Capital, LLC – All rights reserved.
September 16, 2022 |
| Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin
September 16, 2022
Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin