Does Patience bring Roses?

On October 3, one month before the elections in the USA, the editorial of the „Magazin“ (No 40) read the following: „What does it make to be an adult?“ (I did mention this quote some three weeks ago in my weekly mail).

„Faced with difficulties, they look for solutions. They do not despair at the first hurdle. They know that many problems that seem big and important at the moment are not in the long run and will eventually resolve themselves. However, above all, being an adult also means always being friendly and showing compassion for others“. Alain de Botton

Now, back to the question in the headline of this mail. Is the old wisdom that patience should bring roses justified and above all, does it also apply to my profession, the investment of assets for private clients.

Let me say straight away; I think this is the case. When I look back over the last decades, long-term investors have always been able to earn money with stable equity investments, even if they had to accept negative performances in the short term.

As you know, our private clients‘ mandates are geared to cash flows. That is why our portfolios always include shares from insurance- and telecom-, pharmaceutical- and energy-, real estate- and food industry sectors. Now, this year, it is precisely such stocks that are suffering. All of these companies usually produce positive cash flows for years and sometimes decades. From time to time, for a quarter or two, those cash flows may stop. However, and due to their strong balance sheets, these companies are still able to pay dividends. Even though Royal Dutch, for example, has cut its dividend payments for the first time in 45 years, they still pay out 3%, Swiss Re has always paid out 5% or more in recent years, and Zurich Insurance has shown a constant dividend yield of over 6% in recent years. For us, these shares belong in every portfolio that is geared towards cash flow.

If I now take the share of Zurich Insurance as an example, the dividend of 20 Swiss francs over 15 years can amortise the investment of 300 Swiss francs. In our opinion, this is very attractive. All the more so as we find ourselves in an environment of negative interest rates.

We are well aware that our approach requires patience, especially in this exceptional year, but we are convinced that after many good years, some of them even very good, we will just get through this year as well.

You know, Ladies and Gentlemen, Molière is credited with saying that „trees that grow slowly bear the best fruit“. So if patience brings roses and the slow-growing trees produce the best fruit, and if, as Alain de Botton suggested, many of the problems that currently seem to be significant and vital are not in a longer-term perspective and will eventually resolve themselves, then I am rather confident that our cash flow strategy will continue to generate gratifying returns over the coming decades despite Covid-19.

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li