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Switch Your Focus from Tiddlers to Leviathens - But Not Any Old Leviathan

By Malcolm Stacey | Saturday 4 March 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Swappers. We are now living in even scarier times than usual in Shareland. What with Brexit, Big Donald, a possible new cold war, inflation and growing world debt. We are also being frightened witless by the continuing shocking revelations by Uncle Tom and his top team of investigators. If I were running a shaky company, especially one on AIM, I would not be sleeping - ever.

But I believe we should not allow all the uncertainty to put us off the exciting world of making big money out of companies that are doing well - and especially the ones which are almost certain to do better in the future.

So my weekend lesson is to put a bit more faith in established giants that have always brought home the bacon. I’ve always been a strong supporter of smaller firms - especially start-ups - but I know they will be the first to be hit, if any of the big threats facing world finances today were to come true.

So look to the giants. Even if a Footsie firm turns in a profit warning, it is rare that the divided will be cut. Most dividends have been rising steadily for British companies which pay them.

My income comes mostly from dividend payments, not rises in share prices. I’ve still had a good twelve months, which is easy when the Footsie keeps tickling new highs.

But, if the Footsie - and of course the Dow - suddenly wakes up to reality, it is the divis that will keep paying our mortgages and food bills at the cash-out.

But even if you agree with me and switch your emphasis pro tem to elephants instead of tiddlers, you will need to pick the best of the herd.

The most reliable recommendation I’ve ever found for a company which is likely to keep its head above water, even if the outer world crashes around it, is one which increases profits year on year for at least 6 years.

Never mind the total revenue, it’s too often a refuge for inefficient outfits. Instead, look for regularly expanding operating profits, constantly rising dividends and low PE’s.

Also use your imagination. Are the goods and services on offer likely to be still needed in a few years time? Or will technology make them less popular, if not obsolete? Also, is the company you’re looking at likely to be taken over?

All the other bits and bobs are not as important.

I’m not saying you should give up on penny shares - some of mine are rattling ahead at the mo - but in uncertain times, perhaps we should put more of our trust in leviathans.

And now I’m putting my trust in the Punter’s Return. God bless.

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