When you buy shares of stock, you become a partner in a business. Perhaps I'm stating the obvious, but I doubt all investors see their purchases that way. Many see stocks as horses to bet on or as scorecards that tell them how their 401(k) is doing. Because stocks represent pieces of companies, the first consideration is whether that company is worthy of your partnership.
As I told readers two years ago, I keep a wish list of about a dozen companies. I want to become a partner, but I am waiting for the market to offer me a better price - an event that may never come. Some of these shares have been on my list for decades, and in my reluctance, I have missed spectacular successes.
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Johnson & Johnson (JNJ) is a good example. I have lusted after the stock for 20 years, as it has gone from $54 to $176, with a dividend that has increased from 84 cents to $4.52 a share. If you bought J&J in mid-2002, your original investment would be yielding 8.4% annually in dividends alone. (Stocks I like are in bold. Prices and other data are as of June 3.)
When the market drops sharply, I don't despair. Instead, I pull out my list to see if any of the stocks I like have moved into buying range. In other words, could I become an owner? This is a subjective decision. I'm not looking for a particular price-earnings ratio but a general sense that now is the time to pounce on the value stocks.
Such an occasion presented itself in early 2020, when the market tanked on the realization that the COVID pandemic was serious. In the five-week period ending March 15, the
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