Fisher Investments on Consumer Staples

7

THE TOP-DOWN METHOD

So let’s say you use what you have learned thus far to determine you are bullish on Consumer Staples. How much of your portfolio should you allocate to Consumer Staples stocks? Twenty-five percent? Fifty percent? One hundred percent? Most investors concern themselves only with individual companies (“I like Cadbury Schweppes, so I’ll buy some”) without considering how the stocks fit into their overall portfolio. But this is no way to manage your money.

In Part III of this book, we show you how to analyze the Consumer Staples sector like a top-down portfolio manager. This includes a full description of the top-down method, how to use benchmarks, and how the top-down method applies to the Consumer Staples sector. We then delve into security analysis, where we provide a framework for analyzing any company and discuss many of the important questions to ask when analyzing Consumer Staples firms. In the last chapter, we give a few examples of specific investing strategies for the sector.

INVESTING IS A SCIENCE

To be a great investor you have to develop a knack for anticipating the anticipations of others. There is no universally ordained playbook on how to do this consistently. Too many investors today think investing has “rules”—that all one must do to guarantee investing success for the long run is find the right set of investing rules. But that simply doesn’t work. Why? Because all well-known and widely discussed information is already reflected in stock prices. ...