I don’t think there’s an investor alive who doesn’t secretly want to pick the next market darling. Imagine the accolades that would come your way, predicting the next Tesla or Netflix. Even if it’s just among your group of friends, you’d forever be known as the person who made a whole bunch of money by accurately predicting the next big thing. You could bring it up at dinner parties for years afterwards, even if your results after were lackluster. Of course, that isn’t an effective way to invest. Opportunities for 1,000% gains don’t come along very often. For every huge…
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I don’t think there’s an investor alive who doesn’t secretly want to pick the next market darling.
Imagine the accolades that would come your way, predicting the next Tesla or Netflix. Even if it’s just among your group of friends, you’d forever be known as the person who made a whole bunch of money by accurately predicting the next big thing. You could bring it up at dinner parties for years afterwards, even if your results after were lackluster.
Of course, that isn’t an effective way to invest. Opportunities for 1,000% gains don’t come along very often. For every huge winner, there are hundreds of losers, stocks that didn’t go anywhere or succumbed to bankruptcy. Which is why you shouldn’t try. Leave that type of speculating for the casino or a weekly lottery ticket. It’s no way to invest.
No, the secret to successful investing is much simpler. All you need to do is buy the best of Canadian business, at a fair price, and hold over a long period of time. Ignore all the noise and all the short-term nonsense and find companies that dominate their sector. Think of investing as buying part of a business, and not some random numbers on a screen.
Buying high-quality businesses is easier said than done, naturally. It takes due diligence to figure out which are the best and which are being threatened by a multitude of factors. There are thousands of stocks that trade on North American exchanges. How do you pick the best one?
This might sound counterintuitive, but here goes.
You keep it simple.
Like, for instance, a company like Telus Corporation (TSX: T)(NYSE: TU). The company provides home phone, Internet, wireless, and television services to Canadians, with more than 13 million connections across the country. If you’re in western Canada, chances are you have at least one service with Telus, and most likely two or three, thanks to bundling discounts.
Wireless phones have become a necessity in today’s world. Telus has grown to be the second-largest wireless provider in the country, with 7.9 million subscribers. The company has done a nice job of getting customers from its competitors and then keeping them through service that’s consistently ranked higher than the competition.
Sure, the company is starting to lose home phone subscribers, since many younger people are choosing not to bother with a landline and just use their cell phones for everything. But since it has great pricing power, it can continue to increase the price for existing customers, minimizing the damage to the bottom line.
Customers cutting cable is beginning to be a problem for Telus’ competitors, but since the company’s television service is only a few years old, it continues to grow nicely. Current television subscribers number over 800,000, and that’s with the service only being available in a select few big cities across the west. This will continue to grow as the company opens up new areas.
Telecommunications is a solid business in Canada. Even if a foreign company comes in and finally becomes a true nationwide wireless competitor, the incumbents are too strong. Even a well-capitalized competitor will have difficulties becoming a major player, and if it happens, it’ll take years.
Telus also takes care of its shareholders. The company has increased its dividend nine times since 2010, and has repurchased more than 35 million shares since the end of 2012, or about 5% of the float. Management has every intention of continuing to buy back shares and increase the dividend, at least until the end of 2015. Shares currently yield 3.8%.
The reasons to buy Telus are as simple as they are compelling. It’s a terrific performer in a steady business. There are huge barriers to entry. And management has a history of looking out for shareholders. It’s a slow and steady performer, perfect to buy and hold for a very long time. That’s why it should be in your portfolio.
Fool contributor Nelson Smith has no position in any stocks mentioned. David Gardner owns shares of Netflix and Tesla Motors. Tom Gardner owns shares of Tesla Motors. The Motley Fool owns shares of Netflix and Tesla Motors.