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Sunday, September 28, 2014

A Very Simple and Effective Approach to Investing - Forbes


From Detergent To Driverless Cars: Stock Picking Lessons From 60 Years On (And Off) The Street

Investors, entrepreneurs and financial journalists alike are obsessed with what the rise of the Millennial generation will mean for the future of money. Yet, a conversation with an industry veteran served as a reminder that looking back can be just as important as looking forward — even in stock picking.

Gail Winslow has worked in the wealth management industry for 59 and 1/2 years — “to be exact.” She got her start as a Girl Friday — a term coined in 1940 for what we now know as an executive assistant. A Radcliff educated go-getter, Winslow quickly tired of “doing all the dirty work” at D.C. based Ferris and Company so six months in she became a Registered Representative of the New York Stock Exchange. Today, Winslow is 84 and manages close to $200 million worth of assets at RBC Wealth Management, mostly working with clients nearing retirement age (though Winslow proves that is not always synonymous with nearing retirement).

A lot has changed during her six-decade career. To name just one: the S&P 500 finished 1955 at 45.5 points. This summer it crossed 2,000 for the first time. Nevertheless, when choosing stocks Winslow continues to depend on a few faithful principles she learned long ago – many of these drawn from unexpected sources like her mother-in-law, the hair care aisle of the drug store and her washing machine.

Sometime in the early 1960s Winslow called her mother-in-law to suggest she sell some stock. The market was getting “toppy.” Her mother-in-law pulled out her portfolio and asked, “Do you think Chase Manhattan is going to cut their dividend?” Winslow said no. “Do you think General Motors is going to cut their dividend?” No again. They went through every holding before the older woman declared, “I think I’ll just continue to hold.”

(For what it is worth, in 2000, Chase merged with J.P. Morgan, forming mega bank JPMorgan Chase. The company still pays a dividend; its most recent payout was 40 cents a share. For its part, General Motors cut its long standing dividend in June 2008 part of an attempt to save money before its 2009 bankruptcy. A quarterly dividend was reinstated earlier this year at 30 cents a share.)

Looking back, Winslow says in that moment she learned that income is the difference between a speculator and an investor. “Investors say they want their stocks to go up,” says Winslow, “but they really don’t want them to go down.”
Winslow knew innately that women of the day were largely conservative, and with just one other female in the office, found herself uniquely qualified to help Washington’s high power women — researchers at the National Institute of Health, high ranking women in the military and wives of Senators (the nation had just one female senator in the 1960s). “They didn’t want to lose what they had. So I dealt early on with large American corporations that had proven track records.”

When Winslow got her start members of the Baby Boomer generation (born 1946 to 1964) were entering their teenage years. They liked, “Toni Home Permanents,” – hair perms – “bathing suits, potato chips, Frito Lay and Gillette.” Products, she says, that mothers were buying for their teens or helping them use. With 10,000 Baby Boomers now turning 65 each day Winslow is drawn to health care stocks and senior housing REITs.

These days Winslow also looks to the generation of 80 million born after 1980 for inspiration – the Millennials. With Millennials reluctant to purchase homes, Winslow is wary of housing stocks but intrigued by the rental industry. Pointing out that in her day “you put a cigarette in your mouth at 14,” she notes that young people today are health conscious, so avoids cigarette companies and looks to food companies that seem to be taking advantage of trends toward nutritious and natural.

Another thing Millennials love? Technology — and Winslow is a fan too. She has held Intel, Microsoft and IBM for decades. Apple has been in her portfolio for 15 years. (Apple shares are up 3,600% since September 1999.) Winslow is currently intrigued by driverless cars and other technologies that improve safety. For Winslow though, technology does not include just computer companies and complex software.

"Early on in the 50s new products came out and many of them were products used by women in the home – including detergent,” recalls Winslow. “Before that we used ivory soap which we squashed around and which left scum. When Tide came out I thought, ‘wow, is this great.’”

While she is still a fan of dividend payers for her contemporaries, she tells her grandchildren and their fellow Millennials to look for stocks with increasing earnings. Management, she says, should be investing profits back into company growth rather than paying out a high percentage in dividends.

An article from Forbes 

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