The secret for investors is not to go in and out of energy stocks, but to discover which companies do the best job of managing their resources, harnessing evolving technology and positioning themselves for long-term profit in an energy-hungry world. And keep in mind that energy stocks, like other resource stocks, serve as a hedge against inflation.
Maintaining an investment in energy stocks is an integral part of our fundamental investment approach. Our approach is grounded in our three-part investing program-----
1. Invest mainly in well-established, mainly dividend-paying companies. When the market goes into a lengthy downturn, these stocks generally keep paying their dividends, and they are among the first to recover when conditions improve.
2. Spread your money out across the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities). This helps you avoid excess exposure to any one segment of the market that is headed for trouble. Diversifying across the five sectors will also dampen your portfolio’s volatility in the long term, without the shrinking in its potential that you’d get if you invest significantly in bonds yielding little more than 4%.
3. Avoid or downplay stocks in the broker/media limelight. That limelight tends to raise investor expectations to excessive levels. When companies fail to live up to expectations, these stocks can plunge. Remember, when expectations are excessive, occasional failure to live up to them is virtually guaranteed, in the long term if not in the short.
These three investing philosophy principles guide us in every portfolio we manage. Using these three value-investing principles will help protect your money during periods of market turbulence, and help you profit when the market rises.