Last week was the worst performance this year for the various indexes and averages.
It was also the week that Warren Buffet composed his letter to the shareholders of Berkshire Hathaway.
In the letter he commented on an investment Berkshire made in 1994 in Coke.
He still holds the stock today.
He wanted to point out that during this time not only has the stock grown in value but the dividend has increased.
He obtained a hedge against inflation with the dividend and obtained a capital gain on the price of the stock.
In truth, he would have been fine with the dividend as it outperformed inflation.
This has become a debated subject as buy and hold has been tossed as a poor tool for growing your portfolio.
I should point out that an old line tech company Intel last week cut its dividend by 66%.
This is a company that led the chip sector for decades and benefited greatly from the PC boom.
Lately, it has been left behind by the likes of AMD and Nvidia.
So, there is a point to continuously monitoring your investments in companies.
Management can and does lose track of the mission statement more often than not.
I guarantee you that Mr. Buffet pays close attention to each earnings statement.
As such, I would say that there is no generic rule that one can follow outside of keeping up with the financials.
Another point in Mr. Buffet’s letter was directed to stock buybacks.
You have to understand that this is a sensitive subject with politicians.
They chided the oil companies for buying back stock while piling up substantial profits.
I wonder where the sympathy was when they were losing their shirts.
Again, it is just politics and you have to take it for what it is.
What it is not is serious financial and economic thought.
The basis for the losses last week were stronger than expected economic reports.
I am not sure that analysts have given up hoping for the Fed to stop raising rates and start to lower them, but I think I hear a bugle in the distance plying Taps.
I will keep saying this as it is what the Fed has been saying over and over. The Fed Funds rate will climb over 5%.
How long it stays there is the only subject for debate.
I tend to believe it will be there far into 2024. Most don’t agree. Only time will tell
In the meantime, should we get a further pullback, it would seem that there should be some value.
Moreover, you might find some stocks that pay that dividend Mr. Buffet mentioned.
Make sure though that you don’t look for the highest-paying dividend, as that is fool’s gold.
There are solid companies that have positive cash flow and are profitable that pay a dividend.
There will also be the likes of Intel and GE that lost their way.
