Forget the News; Buy Quality

09/12/2014 7:00 am EST


August was a sad and dreary month on the world scene—Israel and Gaza, Russia and the Ukraine, and ISIL in Syria and Iraq—observes Russ Kaplan, editor of Heartland Advisor.

History gives us a useful guide on what happens to stocks following bad headlines. The good news is that markets recover rather quickly.

After 9/11, the market was back to where it was the day before the terrorist attacks by late September. Despite Hurricane Katrina, the market ended that year’s third quarter in the black.

Recoveries after disasters have happened numerous times. History is not a perfect predictor, but I believe all of our current negative news will not hurt the market’s long-term performance. At present, I am not giving much attention to the news and instead continuing to look for good companies to buy.

I have been preaching this strategy for years: those who can find undervalued stocks no matter what the market is doing and hold their stocks for long periods of time are always the winners. Yes, the tortoise will beat the hare.

Coca-Cola (KO)

An all-around staple in our portfolios is Coca-Cola (KO). Over and over I hear concerns that cola consumption is declining. Coca-Cola has been around for many years and over that time period they were smart enough to diversify into other areas of popular beverages.

Right now, they market over 500 non-alcoholic drinks such as Sprite, Dasani water, Hawaiian Punch and more. Recently, the company made a big diversification move. Coca-Cola has invested $2.15 billion into Monster Beverage (MNST) and has entered a long-term partnership with the company.

Monster makes a wide array of energy drinks and caffeinated beverages. Both companies expect to benefit from getting more market share and profit from the fast-growing global energy drink business. Coca-Cola is also a prominent stock in the Berkshire-Hathaway (BRK-A) portfolio.

Deere & Company (DE)

Deere, the leading producer of farm equipment, has also diversified and branched out into construction and lawn care. The company has a long history with Russ Kaplan Investments; it was first recommended in 1998 at less than half the recent price of $85, which is its current trading price.

Deere is heavily tied to the price of agricultural commodities, which are now at a low. As I have learned from many years of investing, a low now does not mean that the stock will stay low forever. At this time, the low price of commodities has made Deere & Company again undervalued, which fits into our buy range.

Deere is a rock solid company, which was founded in 1837. They have always kept pace with the changes in agricultural technology and often invented it to meet their needs for providing better and more efficient machinery. It pays a 2.6% dividend making it suitable for both those seeking income and those seeking appreciation.

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