Thursday, September 4, 2014

A Way to Invest in the "Corporate Century Club"

Do not take this as investment advice.  I am not a financial analyst, stock broker, or other investment professional.  However, as an academic researcher of old companies I find it very interesting that the president and CEO of Invesco Martin L. Flanagan uses these words to recommend a new ETF of century-old firms:  "We believe the PowerShares NYSE Century Portfolio (NYCC) offers investors targeted exposure to companies that have demonstrated the ability to innovate, transform, and grow through decades of varying economic cycles, political conditions, and social change" - the very argument I use at the beginning of all my papers to explain why I study old companies.

This fund is comprised of nearly 375 companies, all over 100 years old.  Reflective of observations I have made previously in this blog (that companies don't need to grow large in order to survive over the long term), just 30% of the portfolio is in large caps.  The composition of the fund also reflects statistics I have reported in my data base: financial and industrial firms comprise a large percentage of the stocks, and utilities are also represented at a higher rate than in the overall market.

One analyst (Eric Dutram, Zachs Investment Research) concludes his review of this fund by saying: "The fund could be an interesting choice for investors who want broad U.S. market exposure with a tilt towards safety....(however) NYCC might not be the best choice for those seeking a low cost option.  Additionally, the fund might not be a great pick in high growth environments (due to its tilt towards safer sectors), though the underlying index did outperform the S&P 500 in 2013."

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