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 that runs Fisher Investments, which has over $70 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.
Following big and successful investors has its benefits, as smaller investors can imitate their picks and generate returns without spending too much time on analysis and without having to pay these funds an arm and a leg. However, there are many issues with this approach, including the fact that many institutional investors, including Ken Fisher hold very large and very diversified portfolios, which means that it would be difficult and expensive to imitate their picks. At Insider Monkey, we have developed a strategy that allows imitating hedge funds and other institutional investors, which eliminates many downsides. Our approach involves focusing on the consensus picks of 100 best-performing hedge funds and since our strategy was launched in May 2014 it has returned 74.4%, beating the broader market by over 20 percentage points. You can access the latest picks from our strategy by checking out our newsletters free of charge for 14 days.
Another way to imitate institutional investors is by looking at certain groups of stocks that they are bullish on, such as dividend stocks that we will focus on in this article. Taking individual stocks from investors’ equity portfolio will require some additional research into these companies, but knowing that these investors have invested in them is a good place to start. When it comes to dividend stocks, there’s the additional advantage that dividend-paying companies are usually financially-sound and should ensure some stable returns over the long-run.
However, it’s now always the case, and 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. I its latest 13F filing, Fisher Asset Management disclosed an equity portfolio worth $76.56 billion. The portfolio is well diversified both across sectors and geographically. In his last several interviews, Fisher suggested that the bull market has a couple more years to run and indicated that a good approach is to be overweight foreign stocks, while maintaining a material exposure to the US stock market. Most of Fisher’s stock picks are long-term investments for years, but many of the positions initiated in the last 5-6 years are indeed foreign companies like Vodafone, Tencent Holdings, or Softbank. Many of Fisher’s picks are dividend-paying companies. For example, among the top 50 largest holdings, 32 are in companies that pay dividends and 29 are stocks that have yields above 1.50%. On the next page, we will discuss five of Fisher’s largest holdings in companies whose stocks have dividend yields above 1.50%.