Probing Rudi’s “all weather stocks”

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From the AFR:

Rudy Filapek-Vandyck calls them “all weather” stocks and says all investors should own them.

But there is just one problem with these must-have companies that can grow their profits and increase value for shareholders no matter what else is happening around the world.

Take a bow Ansell, Amcor, ARB Corp, Brambles, Carsales, CSL, Domino’s Pizza, Hansen Technologies, InvoCare, Orora, Pact Group, Ramsay Healthcare, REA Group and Technology One.

Others that are on the cusp of making the grade include 1300 Smiles, Cochlear, Dulux, Healthscope, ResMed, and Pacific Smiles.

I like Rudi. He doesn’t shave often and likes to appear on TV as if he’s landed just from an all-night rave. And his list looks pretty good too, split into three obvious categories of dollar-exposed industrials, aged care and tech/IT outsourcing. Quite right that each have “all weather” characteristics:

  • the first suported by the natural hedge of a falling currency
  • the second backed by secular trend and cyclical resistance in health care
  • the third supported by government spending across the cycle
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But, if I have an issue with this it is that there is no such thing as an “all weather stock” at all. When the market tanks, the whole market tanks and every stock sees price/earnings compression regardless of the sustainability of EPS.

That is presently why MB has no equities allocation at all. At this stage of the cycle we simply see more upside in bonds and when the accident happens we’ll take our pick of Rudi’s options.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.