Billionaire Ken Fisher is a well-known name on Wall Street, but for those who don’t know or recognize him, he is a money manager who runs Fisher Investments. Fisher Investments has over $80 billion in assets. In addition, Fisher is a popular author, with several of his books becoming New York Times bestsellers and a long-time Forbes columnist. Fisher’s investment approach involves buying unpopular stocks of good companies and hold them for long periods of time and enjoy the returns as companies gain popularity. In this article, we are going to explore some of Ken Fisher’s favorite dividend stocks.
Yesterday, we took a look into Ken Fisher’s top 10 stocks picks at the height of the coronavirus market crash. All 10 of his top 10 stock picks outperformed the market this year (read the second article which links to the first article). During the first quarter Ken Fisher’s top 5 stock picks delivered an average loss of only 6%, vs. a loss of nearly 20% for the S&P 500 Index. That return was even better than the average return of top 5 hedge fund stocks which lost an average of 6.9% during the first quarter. As you can guess top hedge fund stock picks is a very fertile area to look for good stocks to beat the market.
Insider Monkey leaves no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Insider Monkey’s monthly newsletter beat the S&P 500 Index by 44 percentage points over the last 3 years.
We have to warn you that Ken Fisher isn’t a huge fan of traditional dividend investing. Ken Fisher pointed it out himself in his “The Little Book of Market Myths“, when he mentioned the fact that Lehman Brothers paid a dividend in August 2008, just weeks before it went under. In the chapter about high-yield dividend stocks, Fisher says:
“High-dividend stocks aren’t permanently better and don’t have materially different expected volatility or return characteristics over time. As important: Dividends aren’t guaranteed. Firms that pay them can and do and will cut the dividend. Or they may kill it altogether!”
Instead, Fisher suggests to engage in what he calls “homegrown dividends”, which involves selling a portion of shares in order to generate cash. In the end, Fisher says that a well-diversified portfolio is bound to have some dividend-paying stocks, but we shouldn’t focus on them and, instead pay more attention to the overall long-term return rather than just the dividend yield.
Having said that, let’s now take a closer look at Fisher’s stock picks.
The biggest dividend stock position in Fisher is Apple Inc (NASDAQ:AAPL). Apple Inc shares yield a little over 1% in terms of annual dividends. Fisher had nearly $3.6 billion invested in this $1.34 trillion company. Apple Inc. shares returned 22.3% so far in the second quarter. We are certain that Fisher didn’t invest in Apple shares for the puny dividend of 1%. We singled out this position to illustrate what Fisher means by “homegrown dividend” stocks.
We have to tell you that not everyone agrees with Ken Fisher about investing in quality stocks at this point in the market. In the following video you can watch why Bill Miller thinks it doesn’t make sense today to invest in quality stocks such Apple Inc (NASDAQ:AAPL) and 6 other recession stocks that performed well so far (Bill Miller’s hedge fund returned 120% in 2019).
The biggest position with at least a 4% trailing dividend yield is Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Ken Fisher had more than $1.4 billion invested in this stock. Hedge funds are following Ken Fisher’s lead too. The total number of hedge funds with bullish positions in Taiwan Semiconductor has increased from 30s in the middle of 2017 to 50s today. TSM has rewarded hedge funds with a year-over-year EPS increase of 91%.
The third dividend stock from Ken Fisher’s portfolio that we are going to bring to your attention is TOTAL S.A. (NYSE:TOT). This energy giant offers an 8% dividend yield. However, TOTAL S.A. is currently facing major headwinds. Energy prices have plunged and TOT’s cash flow declined by more than 30% year-over-year. Things can get much worse this quarter and the rest of the year and we might see TOT resort to a dividend cut. For now, TOTAL’s board of directors considers that as an option, declaring a quarterly dividend of 0.66 euros.
JPMorgan Chase & Co. (NYSE:JPM) is the fourth dividend stock in our list, offering nearly 4% in annual dividends. Ken Fisher had $544 million invested in the banking giant at the end of March. JPMorgan Chase shares were trading above $140 in December and now can be had for a 35% discount. We believe they offer a decent long-term upside potential at $90 even though JPM will experience some strong near term headwinds as bankruptcies will start to hit the markets in the coming weeks.
The last dividend stock we are going to talk about today is Anheuser-Busch InBev SA/NV (NYSE:BUD). This beer giant offers more than 4.5% in annual dividends, however investors are concerned about its huge debt load in these choppy markets. BUD investors today are looking at declining sales, quarterly losses, and more pain if the coronavirus shutdowns linger on for another 12 to 18 months. BUD isn’t a stock for risk averse investors but if things go back to normal faster than expected BUD shares will probably gain 50% or more in the next 12-18 months.
Disclosure: No positions in Apple Inc (NASDAQ:AAPL), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), TOTAL S.A. (NYSE:TOT), JPMorgan Chase & Co. (NYSE:JPM) and Anheuser-Busch InBev SA/NV (BUD). This article is originally published at Insider Monkey.