Our 2024 Investment Strategy for Equities

We’ve been busy taking a look at our equity investment strategy for 2024. For 2023, we’ve mostly been in T-bills and a few oil stocks but we’ve been refining our strategy moving forward and while we’re not done, we can share the bulk of our strategy. We’re doing this now because we believe 2024 and 2025 may be great investment years if we enter a recession and we expect markets to correct later this year or in 2024. The best time to buy stocks is when everyone is panicking and selling. “Be greedy when others are fearful and be fearful when others are greedy.” -Warren Buffett

Demographics

The primary driver of our new investment strategy is a huge hedge against deteriorating demographics that we’ve written about endlessly on our blog. A quick summary of this is the deterioration of the labor force while simultaneously increasing the population on social programs. In essence, the productive population is dwindling while the unproductive population is increasing.

To that end our first criteria is selecting companies that have a significant “profit density” or in financial terms high net income per employee.

Income

Our second criteria is to select equities that have a long and strong history of dividend payment and/or dividend growth. The entire point of owning and investment is to generate income. The generation of income can come from the growth of the price of an equity or the monthly/quarterly or annual distribution of income via dividends over time. We prefer the latter than the former but our portfolio will be top heavy dividend equities.

Value

We believe strongly in value equities and there are a variety of calculators, websites, and other tools to determine whether a stock is a good value proposition. We’ll write a post about some of these tools and websites later.

Options

The equities we invest in must have an options market. We believe in using options to squeeze extra income by selling calls or buying the stocks at a discount via selling puts. When it comes to stocks you make money in selling the equity or selling the right to the equity to someone.

S&P 500

It is rare for most traders around the world to beat the S&P 500 and our experience is that very few investments ever beat the S&P 500. Most people have been trained to buy the S&P 500 index so there is always a flow of money into these equities in good times and bad. So our strategy requires that the bulk of our equities belong inside the S&P 500 index. This doesn’t mean we won’t ever own an equity not in the index but we will have a bias toward S&P 500 equities.

DIVOS

We call our new strategy DIVOS ^TM and while there are a few other factors which we’ll discuss as we enter positions, it’s safe to say that we’re happy with our current research and model.