How Are Our ‘Ten Stocks For Ten Years’ Faring?

By Peter Switzer, Switzer Report

How are our “10 stocks for 10 years” faring?

In my perpetual quest to learn how to invest better and then pass it on to my subscribers, readers, financial planning clients and other media followers, I like to look back at previous stories/lessons I’ve shared to see how the selections worked out. My latest look back on my work took me to February 2018 to see how my “10 stocks to hold for 10 years” piece is playing out.

This was my opening paragraph, which I’m pretty happy about: “One of the most frequent questions I receive on radio and in real life is “what stocks/s can I buy for the long term?”

Predictably, I often refer novices to look at the big four banks, CSL and Macquarie whenever the market decides to fall out of love with these great performers.”

I’m pretty happy with that advice and I’m glad good old Google and Yahoo will testify to my then great insights!

Paragraph 2 was also one that I can stand by, thank God! “Of course, individual stocks always have risks linked to government, competition, technological change, etc. A crazy CEO can also be a risk and that’s why I say to many newcomers that a core holding of say iShares Core S&P/ASX 200 ETF (IOZ) or SPDR® S&P®/ASX 200 Fund (STW), maybe along with a dividend-paying fund, such as my own Switzer Dividend Growth Fund (SWTZ), is a pretty safe way to dive into the stock market for the long term. You could easily split your core holding in your portfolio of stocks between, say IOZ and SWTZ and have a fairly stable foundation over a 10-year period.”

The story went on to look at 10 recommendations for the long-term — 10 years. I recruited some of my legendary market mates, such as Rudi Filapek-Vandyck, Geoff Wilson, Roger Montgomery, Paul Rickard and so on, and asked them to give us one stock to hold for 10 years.

Here’s what they recommended and here’s how they went:

1. Rudi: CSL $198.57 to $338.68 — that’s up 70%
2. Paul: Also tipped CSL and is pretty happy with himself
3. Geoff: TPG $5.49 to $8.10 — a 47% gain.
4. Roger: CBA $72.31 to $87.85
5. Me: IOZ + SWTZ delivered 22% and 11% respectively, plus 14.2% dividend yield for SWTZ.

(I added in the SWTZ dividend effect because its job is to deliver income but, of course, IOZ and CBA would have also brought nice dividend income as well.)

I won’t name the guys who didn’t cover themselves in glory, because stock tipping comes with many challenges, but I will look at the failed stocks and hazard a guess at what went wrong and what were the big lessons.

Tencent is one of the best companies in the world, when it comes to potential because it harnesses the future of China as it becomes increasingly wealthier and its middle class grows. It is in the social media and retail space and will be a winner, but it has copped the trade war and now the Coronavirus. It was a $53.29 stock in February 2018 and is now $52.26, which shows how resilient the company is to headwinds. But when it comes to stocks, there can be temporary problems that will over-influence short-term players, such as fund managers, but this creates opportunities for long-term investors.

Pact Group (PGH) was another selection and this company seems in trouble. Its share price has gone from $5.48 to $2.42 and just can’t live up to expectations. That said, the consensus view of FNArena’s [database brokers] has it with 16% upside. Given this was a stock to hold for 10 years and we’re only two years in, it might be a future better performer.

Event Hospitality and Entertainment (EVT) was another poor performer liked by a well-known fund manager, but its share price fell from $13.93 to $12.40. The analysts think it has 14.9% upside and, being in the tourism space, it’s not really a great time for this industry, with the Coronavirus. That said, the company is not giving out healthy signs.

Two foreign stocks — Maruti Suzuki and Liberty Lilac — were not impressive performers, with the former seeing its share price fall by 24% on the Indian stock exchange and the latter lost 8.3% on the Brazilian stock exchange. One of these fund managers has changed jobs and from my point of view it’s hard enough to understand companies without throwing in curve balls such as what’s going on in India and Brazil.

If I wanted to play these markets, I’d do it through a fund where the fund manager had form on the board.

So what are the other key lessons from this exercise?

1. Buy quality companies when the market goes excessively negative. The bank stocks were a case in point, with the Hayne Royal Commission creating a buying opportunity.
2. The events such as the Coronavirus are creating buying opportunities, but make sure if you gamble on affected or ‘infected’ stocks that you do it with quality companies.
3. Bad performers over a two-year period might be going through a rough patch, but I’d be wary about companies that have struggled to turn around their poor earnings’ results for a sustained time.

Next week I’ll look for 10 new stocks to hold for 10 years.

Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.

Content included in this article is not by association the view of FNArena (see our disclaimer).

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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