Successful long-term investing is less about finding the next big thing and more about finding well-run businesses with reliable returns and buying those stocks without overpaying, according to a recent article by Validea CEO John Reese for The Globe and Mail. This approach, subscribed to by legendary investors Warren Buffett and Peter Lynch, requires patience through the inevitable ups and downs of the market but rewards those investors willing to stick it out.
Using his guru-based investment strategies, Reese offers the following picks that fit the investment styles of Buffett and Lynch:
United HealthGroup (UNH) This health-care provider meets our Buffett-inspired model which requires an above-average return-on-equity (has averaged 17% over the past decade) which has only slipped once below Buffett’s preferred 15% minimum.
Ingersoll Rand (IR), a manufacturer of equipment used to control the air and environment for both residential and industrial applications, passes our Lynch-based screen given its several years of rapid earnings growth (IR’s growth in earnings-per-share has averaged 23% over the past few years).
Wells Fargo (WFC) One of the largest American banks (a 10% share of which is held by Buffett), WFC has been battered by regulatory scrutiny and public scandal following an investigation into unauthorized customer accounts, but its solid brand and strong market share give it the industry positioning Buffett likes in his companies.