A second theme on which he bases his investment strategy is the aging of America. He identifies Pfizer (NYSE: PFE) as a company well positioned to take advantage of this trend. Impotence drug Viagra, cholesterol drug Lipitor, and the antidepressant Zoloft are all Pfizer products – and each one has annual sales in excess of $1 billion.
Mr. Garza’s third investment theme focuses on the power of Generation Y – Americans born since 1983. He thinks Viacom (NYSE: VIA), through such vehicles as MTV, VH1, Nickelodeon, CBS, and Blockbuster, is well positioned to take advantage of the growing purchasing power of this youthful group.
Louis Barajas, president, Louis Barajas & Associates, Los Angeles
Like Mr. Garza, Louis Barajas advocates a long-term investment strategy. He tells of a client who recently withdrew his $70,000 from Barajas & Associates and, believing he could see higher returns faster, tried his hand at day trading. He lost it all almost overnight. While Mr. Barajas has sympathy for the unfortunate investor and would take him back as a client, he “can’t make anything rise from the ashes,” he says.
“As much as I’d love to play the home-run game, I don’t have a vision of what the market is going to do tomorrow,” the 18-year veteran of professional financial planning admits. “But I do have a vision of what [my client’s] family needs. The younger people are the ones who take the money and say they’ll hit the home run. That changes with time; the more experience they have, the less likely they are to invest for the short term.”
He warns his mostly Hispanic clientele of being lured by what he calls “investment pornography – what looks good on the outside but is not good for you. A lot of the investment media want to sell you what looks good, but it’s more sizzle than substance.” Substance, Mr. Barajas argues, comes through diversification and patience. He likes the diversification of mutual funds and often reminds investors that when the S&P is seeing 20 percent returns, some of those stocks are down. He espouses a buy-and-hold strategy akin to that of Berkshire Hathaway’s CEO Warren Buffett, whom he calls the most admired but least imitated investor.
The market’s downturns afford investors great opportunities to start or expand their investing – buy low, sell high, as the saying goes. Consequently, Mr. Barajas says his company raised more money in the last six months of 2000 than it did in the last three years combined. He thinks some of the best deals are in value funds, since they’ve underperformed lately. He likes several of the DFA funds. The DFA U.S. Large-Cap Value Fund saw its returns fall from 38.36 percent in 1995 to 4.32 percent in 2000.
Similarly, the DFA International Value Fund fell from 16.3 percent gains in 1999 to 5 percent losses in 2000. He attributes their poor performance to the move away from value investing: “These weren’t the chi-chi stocks and have been out of favor for several years,” he says, but he foresees real growth in the near future.
“I honestly believe that for the long term, you cannot beat a managed fund,” he says. “I use stock picking as what I call fringe investing. A client will give me $100,000; I’ll put $75,000 in managed funds. With the remaining $25,000, we’ll open a Schwab account for them where they can do their own picking with our help. When an investor wants to invest in a single stock, they’re going for a home run. That’s like those people who go to Vegas and lose a little bit every time but win occasionally. You hear about the wins, but you don’t hear about the losses. Those losses add up, and the wins rarely cover them.”
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