Backbone stocks lead the way in 2011
Investing in blue-chip companies in key industries such as the banking, pipeline, utilities and telecom segments may be boring, but it works, says the Leon Frazer Quarterly Review
For over seven decades, the Leon Frazer dividend investment style has been characterized by its focus on “backbone” stocks.
These blue-chip companies are found in key industries that possess a certain degree of market insulation, such as the banking, pipelines, utilities and telecom industries. As a result, they tend to be well-capitalized companies with stable revenue streams that grow consistently over time.
These backbone stocks account for more than 40% of the holdings in Leon Frazer portfolios, a number that has not changed significantly over time.
While many have characterized these types of holdings as boring, over time, being boring has been beneficial.
This was particularly true in 2011, when boring, backbone companies were the best performing stocks in Canada.
Though 2011 was characterized by significant economic, political and market uncertainty, the certainty of dividends from these allegedly boring stocks was a driving force behind Leon Frazer’s market-leading performance. In a world where uncertainty reigned, the assurance of safe and growing dividends stood out.
THIS ARTICLE ADAPTED FROM THE LEON FRAZER QUARTERLY REVIEW, Q4 2011