Find A Need And Fill It
Northwestern University sits on the shores of Lake Michigan. It’s a beautiful campus, particularly when the leaves are turning golden. I left work and drove to night school to begin the fall semester. I thought to myself, ‘I want to be an accountant, why is a marketing course required?’ Marketing 101, here I come.
Professor Howard was an executive in a major advertising agency and taught in the evening division. I quickly learned the value of professors serving the business world, versus pure academics.
In big letters on the blackboard – “Find A Need And Fill It!” – the subject of the first night’s lecture. I looked out the open window and felt the cool evening breeze when he walked in.
He explained this premise is a basic marketing truth. He shared exciting, personal stories. I was mesmerized – for the entire semester.
My life changed forever. For almost four decades I served as a marketing consultant to 40 of the top 500 US corporations – applying Professor Howard’s basic truth to my clients.
The New Norm
Prior to the bank bailouts, a 6% interest rate was considered normal. Investors today must learn how to survive with interest rates unlikely to keep up with inflation. That means putting more of your life savings at risk; from stock and bond losses and inflation. It’s a tough balancing act.
I contacted Tony Daltorio, a highly respected member of our panel of experts. Much like Professor Howard, Tony is an experienced educator. We have not heard from Tony lately. He started a newsletter, “Growth Stock Confidential” and I wanted to research it before bringing it to our readers.
DENNIS: Tony, thank you for helping educate our readers. In your first issue, you talked about change and the difference between value and growth stocks. Can you explain those differences and why you started “Growth Stock Confidential?”
TONY: Thanks for inviting me. There are dozens of newsletters focusing on income, market segments, metals, etc. I felt another need existed in our market. Investors also need long term, safe capital growth on top of dividend income to fund their retirement.
No single well-known way of investing works forever. Growth stocks are great until you hit a period like 2008-09 and then you watch helplessly as your capital disappears. And value stocks may stay cheap for longer than you’re willing to be invested.
Growth Stock Confidential is geared to find reasonably-priced stocks of companies that have a major, long-term macroeconomic tailwind in its favor.
I made the whole world my investment playground. I don’t limit my research solely to US stocks. Many investors make the mistake of sticking to only the US (home bias is great in sports but not investing). As long as a stock trades in a US market and has a good amount of daily volume, it’s fair game.
The macroeconomic tailwinds could be literally anything – infrastructure, aging of the world’s population, pollution, electric vehicles, consumer growth in emerging markets, you name it.
In each issue, I educate readers about one of these big trends I’ve spotted and provide details about why I think it’s a long-term trend. I then recommend the best company I could find to meet the need.
DENNIS: Each issue starts with 4 pages of research discussing the need which needs to be filled. One month you discussed how the tech sector created products that took the world by storm. The next month you outlined opportunities due to the aging US infrastructure. You recommended a 100-year-old company and their stock is up over 25%.
How do you find these opportunities?
TONY: I’ve always been a contrarian investor (my favorite investor was Sir John Templeton). I look for opportunities where Wall Street analysts fear to tread. It makes little sense devoting a whole issue talking about the latest events at Apple. That information is available in lots of places for free. I want to educate our readers about things they don’t know.
My focus is where the mainstream US financial media is not; smaller US companies and overseas stocks. During my 20 years of working with clients’ portfolios, the biggest fault I would find is the lack of world-wide exposure – 76% of the global economy and about half of global stock market capitalization.
Many of the leaders in a specific field lie outside the US. For example, there was a recent 60 Minutes piece about the plastic pollution accumulating in our oceans. That’s a big problem that needs to be tackled in many ways. One way is through the recycling of plastic bottles.
A major Norwegian company is using reverse vending machines to give incentives to people to recycle. US-based investors can buy it through their brokers. Their ADRs (American Depositary Receipt) trade in the US in the over-the-counter market with lots of daily volume. I recommended it, and despite shaky global markets, it is trading at an all-time high.
DENNIS: Your research is extensive. I would imagine you have cases where you spent hours deciding not to make a recommendation.
TONY: Yes, that does happen; generally, when there are two or more companies that are both doing well. It makes for a tough decision. When I was Growth Stock Advisor editor, I had to choose which company in the pet care area I would recommend – either an animal pharma firm or a company that makes diagnostic testing equipment for vets. I opted for the equipment maker.
DENNIS: You not only talk about players who may be directly involved in meeting the need, but you also look down the supply chain to see who serves them. You have recommended suppliers that have provided even better returns than the marquee company. Can you elaborate?
TONY: Remember our history about the California gold rush. Most gold miners came home penniless, but the guys selling the pick, shovels and blue jeans became rich.
This really applies to technology stocks. People are excited about the potential of electric vehicles. I would never recommend an over-hyped stock in that space like Tesla.
I’d prefer owning someone in the supply chain. I recommended one of the world’s premier makers of electric motors – a Japanese company that also trades (ADRs) here in the US. It is doing a lot of business in China’s electric vehicle market in addition to its business of electric motors for industrial equipment, home appliances, etc.
DENNIS: You caution readers. While the need exists, there may be a lag between recognition and lift off. Can you elaborate on this?
TONY: Experience is the best teacher. The most valuable element an investor needs is patience. Microsoft and Apple existed for years while Wall Street thought these types of companies were not investable when compared to a ‘blue chip’ like Bethlehem Steel. Many investors tend to extrapolate current trends into the future, missing the massive changes that become obvious to most only after much of the money has already been made by others.
That 100+-year-old company you mentioned is involved in boring infrastructure projects like dredging. Everyone knows about the massive infrastructure problem we have in our country, yet the stock languished for years between $5 and $10 a share. Recently, a few on Wall Street have recognized this diamond in the rough and the stock has responded. Their future is bright as our infrastructure is in such woeful shape and many billions of dollars will have to be spent to keep things from crumbling.
DENNIS: One final question. We ran a series of articles about gold stocks and inflation. You devoted an entire issue to gold. Can you explain to our readers what you see as the outlook for gold?
And thanks again for your time.
TONY: My pleasure Dennis.
I feel people look at gold in the wrong way; by looking at it as either a speculation or even as an investment.
When I was a financial advisor, I told clients to look at gold as an insurance policy. You have insurance on your life, your health, your home, and your car…why not have insurance on your accumulated wealth?
Gold is a terrific insurance policy and is there when you need it. Gold doesn’t perform well when the outlook is positive and markets are going upwards. So what? Your other assets are rising in value.
Gold comes into its own when investors are wary and markets are unstable with a downward bias. I believe it is one asset class that investors can turn to when they are looking to protect their capital from falling markets.
Here’s something your readers may be unaware of. Even though we’ve been in a bull market for stocks for a long time, gold still has managed to beat the S&P 500 index this century. Since December 31, 1999, gold has gained about 345% versus about 70% for the index, thanks to the bear markets at the turn of the century and the 2008/09 financial crisis.
My recommendation was a gold company that is a rarity in the industry – a true growth story. When it took over an Australian company a few years ago, it came into possession of one of the richest gold deposits in the world. It then invested into the mine and now production from the mine continues to ramp up year after year. Since adding it to the portfolio in mid-January it’s already up 22% for my readers.
Dennis here. Tony’s newsletter is well researched, educational and I highly recommend you check it out.
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50% discount
For a limited time, Tony’s offering a 50% discount off the normal rate for Miller on the Money readers. |
On The Lighter Side
Many thanks for the kind words from readers concerning my current cancer treatment. Like the old good news, bad news joke, I can summarize in one sentence. Treatment is going as planned. The side effects are cumulative and more challenging by the day. The last day of treatment is June 25th, (Christmas six months early) however I’m told it will be several weeks before I start to feel normal. This too shall pass….
And finally…
We will close out this week with some more of friend Bob O’s adult truths.
- How many times is it appropriate to say “What?” before you just nod and smile because you still didn’t hear or understand a word they said?
- There is great need for a sarcasm font.
These last two are very appropriate for me this week:
- You never know when it will strike, but there comes a moment when you know that you just aren’t going to do anything productive for the rest of the day.
- I totally take back all those times I didn’t want to nap when I was younger.
Until next time….