Justin’s note: Here at the Dispatch, we focus on finding the top money-making plays today, from the electric car revolution… to the cannabis boom… and most recently, the opportunity in gold stocks.
But as my good friend Nick Rokke explains, you can’t take advantage of these kinds of opportunities if you’re consistently losing money on your investments. That’s where Nick’s new system comes in…
In his essay below, Nick shares how he pinpoints today’s “untouchable stocks.” These are the stocks that can help you protect—and grow—your wealth over the long haul. Read on to get his top five that make the cut…
By Nick Rokke, analyst, The Palm Beach Daily
Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.
—Warren Buffett
Many consider Warren Buffett to be the world’s most successful investor.
He’s used his business acumen to build an estimated net worth of $84.7 billion… making him the world’s second-richest man (behind Amazon founder Jeff Bezos).
How did he make all that money?
By following his No. 1 rule: Never lose money.
At the Daily, we’re always looking for money-making opportunities.
Some of them will be short-term speculative plays that can generate life-changing gains in a few months or years, such as cryptocurrencies.
Others are longer-term strategies like our Elite 25 portfolio.
But the bottom line is, you can’t make money off these opportunities if you’re losing money on your investments.
In today’s essay, I’ll show you which types of companies will help limit your losses while growing your portfolio.
They’re not as exciting as high-flying tech stocks. But if you’re patient, these “untouchable” companies will help protect your wealth over the long haul.
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How to Apply Rule No. 1
Whenever you take a loss, you need to gain a larger percentage back just to break even.
If you lose 10%, you need to gain 11% to get back to even. If you lose 50%, you need to gain 100% to get back to even. And so on…
The key to not losing money as an investor is to find great companies that you can hold for the long run. These companies may go down in price… But you don’t have to worry because you know they won’t fall that much… and will eventually rebound.
This is the strategy Buffett uses.
Before he invests in a company, he tries to determine if the company will be around for a long time. During the annual Berkshire Hathaway shareholders’ meeting in 2017, Buffett explained what he looks for:
We sort of know it when we see it. It would tend to be a business that for one reason or another we can look out five or 10 or 20 years, and decide that the competitive advantage that it had at the present would last over that period.
Buffett has benefited from this strategy time after time. For example, he spent more than $1 billion on Coca-Cola stock in 1988.
The company grew nearly 16 times over the ensuing 27 years when accounting for dividends… despite the market going through several crashes during that span.
He also invested $290 million in banking giant Wells Fargo in 1990. He held the company for 24 years for a total return of 9,417%.
Buffett knew that people would still buy soft drinks and use banks no matter what happened in the markets. And he was proven right—time and again.
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The “Untouchables” Portfolio
One way to protect (and grow) your capital for the long haul is to add what we call “untouchable” stocks to your portfolio. These are stocks that you’ll never lose sleep over.
We wanted to find the best “untouchable” stocks out there… So we looked for companies that hadn’t dropped more than 10% in a calendar year over the past two decades—even when the overall market crashed.
Of the approximately 12,000 stocks we looked at, only 21 passed the test. That’s about 1 out of 600 companies stable enough for us to consider “untouchable.”
From 2000–2017, these stocks have never crashed—and that span includes two massive 50% stock market crashes.
The largest “untouchable” company is Johnson & Johnson (JNJ), the world’s biggest drugmaker and consumer-packaged goods company.
(Note: Johnson & Johnson has had pullbacks of greater than 10%… but it has never declined more than 10% over a calendar year.)
By not losing money, JNJ was able to compound wealth for investors. For every $1,000 you invested the first day of 2000, you’d have $4,646 now (assuming you reinvested your dividends). That’s around a 360% gain.
You can probably expect similar returns over the next 18 years…
Johnson & Johnson will be around for a long time. Do you think people will still need Band-Aids, Tylenol, and baby powder 20 years from now? If so, it’s probably a good investment.
The same goes for the other companies on our list. These are the five largest to make our cut of “untouchables”…
| Company | Ticker | Industry |
| Ball Corporation | BLL | Aluminum Cans and Aerospace |
| Johnson & Johnson | JNJ | Pharmaceutical and Consumer Goods |
| General Mills | GIS | Food |
| Sherwin-Williams | SHW | Paint and Chemicals |
| Southern Company | SO | Gas and Electric Utility |
“Sleep at Night” Protection
These businesses make or produce things that people need: food, paint, electricity, etc. And like Buffett said, we know they’ll be around in 10 or 20 years.
On top of that, they all pay dividends… And all but Ball have raised their dividend payouts every year for more than a decade.
In fact, Johnson & Johnson has raised its dividend every year for 53 consecutive years. That’s consistency.
The next time you’re looking to make an investment in a safe security, consider these “untouchable” stocks.
And always remember, do your homework before investing in any company.
Regards,
Nick Rokke
Analyst, The Palm Beach Daily
Reader Mailbag
Today, high praise for Crisis Investing chief analyst Nick Giambruno…
Dear Nick—great job. Thank you for all that you do! I so look forward to all your communications. And I’m doing very well with your recommendations—especially your marijuana picks. Thanks again!
—John
As always, if you have any questions or suggestions for the Dispatch, send them to us right here.
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