You Can Make Money in Stocks

Posted by: Tom Keene on December 13, 2011

We expect an annualized return of 9 percent from this approach over five to seven years. We’ve built a portfolio that will have a minimum cash yield of 4.5 percent, and get an additional 150 basis points in return from companies doing share buybacks and debt paydowns (a basis point is the equivalent of 0.01 percentage point). We think that growth in global gross domestic product will average 3 percent, and earnings tend to correlate with global GDP. That’s how we arrive at a 9 percent annual return.

William Priest: Following the Cash Flow, The founder of Epoch Investment Partners hunts for companies deploying cash in shareholder-friendly ways, As told to Lewis Braham, Bloomberg BusinessWeek, 21 Oct 2011.

You can’t make money in stocks. This attitude pervades coast-to-coast as America drowns in bank underperformance.

I do not have the TRA function in front of me, but the ability of the Bloomberg Total Return function to crush, simply crush the defeatist gloom is just remarkable. See MCD, as a representative example.

You, with your 201(k), me too, should tattoo Priest’s classic Shareholder Yield to your brain.

For the rest of us, think inflation and a corporate spirit that screams cash-flow management and deployment of said, to shareholders. You can make money in stocks. Discuss.

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EconoChat captures Tom Keene's thoughts on economics, finance and investment. He is editor-at-large for Bloomberg News and hosts Bloomberg Surveillance and Bloomberg on the Economy on NYC1130, Sirius 129 and XM 130 and Surveillance Midday on Bloomberg Television. His complete interviews are at Tom Keene on Demand. Look for Tom on twitter @tomkeene

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