Gene Marcial's Inside Wall StreetIs the strategy of buy-and-hold investing too old-fashioned, if not passé? It sure has taken plenty of abuse in today's frenzied high-tech and algorithm-powered trading world. But some true believers remain undeterred.

Take Albert Meyer. He's a passionate money manager whose many years as an accounting professor and equities researcher taught him to stick tenaciously with the principles he believes lead to savvy investing. For him, that means hanging onto good-old buy-and-hold. His exhaustive research (he pores over 10 years of a chosen company's 10K reports) gives him the confidence to adopt a longer-term outlook.

All that work has resulted in the consistently market-beating portfolio he manages at Mirzam Capital Appreciation Fund. For the 10-year stretch ending Dec. 31, 2009, Mirzam's portfolio of 24 stocks handily outscored the Standard & Poor's 500-stock index. His stocks delivered a mighty gain of 450% over the 10 years, or an annual gain of 18.6%, vs. the S&P's total decline of 24%, or a yearly loss of 2.7%.

Meyer makes sure that his portfolio doesn't include shares of companies whose corporate governance and investment practices don't pass muster, in his eyes. He abhors companies that overcompensate their chief executives, especially companies that use stock options as the reward. And Meyer derides outfits that are skimpy in their dividend policies, and he disdains those that tend to boost their earnings by buying back shares. He thinks that kind of money should instead be invested in the company to improve sales and produce real earnings.

Although he buys both large- and midcap companies, not many of the stocks Meyer picks are either widely known among investors or popular on Wall Street. Here, for instance, are five buy-and-hold stocks whose corporate governance practices, says Meyer, are unsurpassed. Plus, they all pay dividends and provide shareholders with stellar returns:

  • Canadian National Railways (CNI) is Canada's largest railway, operating a 22,000-mile track network spanning Canada from the Atlantic to the Pacific and down through Chicago to the Gulf Coast. Management has used stock options to a minimum (only 1.16% of outstanding shares are dedicated to stock options by year-end 2009). With a dividend yield of 1.6%, the stock is trading at $63.92 a share, up from its 52-week low of $49.
  • Gerdau (GGB) is the world's second-largest flat-steel producer with over 55 minimills in South America and North America. It's trading at $12.62 a share, up only slightly from 52-week low of $11.85. The company is 67%-owned by Brazil's Gerdau family. About half of its iron ore comes from its own mine in Brazil. The company doesn't grant stock options, but it pays a dividend yield of 2.5%. "It would be difficult to find a stock that provides a better return to shareholders in the past 10 years," says Meyer.
  • Southern Copper (SCCO) is the world's fourth-largest copper producer with the second-largest copper reserves. Based in Arizona, its main deposits are in Peru and Mexico. Southern Copper is about 80%-owned by Grupo Mexico, and the CEO's annual compensation in the past three years averaged $1.3 million, with about half in cash bonuses. Southern Copper pays a dividend yield of 3.9%. Currently trading at $41.93 a share, the stock is up from a 52-week low of $25.
  • Tenaris (TS) is a maker of highly proprietary seamless and welded tubular products and related services to the world's energy industry. Its products are used, among other things, for deepwater oil drilling. Essentially debt-free and with cash on hand of about $100 million, the aggregate compensation earned by directors and senior management in 2009 amounted to $18.2 million. Its stock is trading at $42.54 a share, up from its 52-week low of $32, with a dividend yield of 1.2%.
  • TransCanada (TRP) is engaged in natural-gas transmission and power generation in North America. It owns one of the largest natural-gas storage facilities in the U.S, as well as 20 power plants with 11,770 megawatts of generating capacity. TransCanada is "a true buy-and-hold-and-never-sell kind of stock," says Meyer. Investors would be hard-pressed to find another company "that's as good or better in corporate governance characteristics," he adds. Trading at $35.32 a share, the stock is up from a 52-week low of $30 and pays a hefty dividend yield of 4.4%.
These stocks all provide a decent annual income stream. So, for investors seeking stocks for a traditional buy-and-hold strategy, Meyer's top stock picks may be the answer.


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gymbo bogymm

the article is nonsense...no such thing as good investmebts with a dividend dangling for a hold.Obama and the socialist are penetrating all amrkets...Europe and Russia are examples of perverted economics...never hold long term in a short term world...as changes accur, instability creats fragile markets...one spark strays a fire hat burn a lawn or an entire forest down...paly a short on indexes at this level....stay away from commodities...bet on doiwn world markets for the next several yesrs...why??? Communist Scina is at your door....Russia is showing it; strue desires..expansion...South America....becoming a new battle field of communist regimes....America..allowing theives to rule us...point??? Obviously INSTABILITY>>>>>SHORT>..take increments of etfs and etn's...on double shorts or even triple....it;s about money...when you seee the herd moving in one direstion with a mighty force...get behind them, and hide...it always turns around and back faster........SHORT! Never long any market in the present world...whyen I see some say they are optimist in this present world...I see a dreamer with night mares in their future!

December 03 2010 at 2:28 AM Report abuse -1 rate up rate down Reply
purples1958

With the advent of all electric cars, several companies are gearing up to provide charging stations for these vehicles. That sounds like a technology product that could become as common as parking meters. Are there any companies that you have looked at who are pioneering the charging stations and would make good investments for the future?

December 01 2010 at 10:59 PM Report abuse -1 rate up rate down Reply
boyadj45

idiotic

December 01 2010 at 5:38 PM Report abuse +1 rate up rate down Reply
Steve

This would all be valid information if Genie-boy had shared all this great info when these stocks were at their "52-week low". But, it's probably too late now. The rebound is behind us and we'd be buying "high". All we're getting here is news about past growth, not viable prediction.

December 01 2010 at 4:41 PM Report abuse +3 rate up rate down Reply
lpi2007

It doesn't matter what stocks you buy, the Government will bail you out. The Government stands behinds the crooks of Wall Street.

December 01 2010 at 9:29 AM Report abuse -6 rate up rate down Reply
1 reply to lpi2007's comment
bdyftns

lpi2007.....Really? Tell that to all the business that went bankrupt over the last 4 years.

December 02 2010 at 7:53 PM Report abuse +2 rate up rate down Reply
Thomas Braun

GENE MARCIAL should be fired for his stupid comments about GM. He neglected to say how obama and his band of thieves made the company go belly up and stealing shareholders monies and 29 billion dollars of bond holders monies. Now GM is a viable company. I don't think so and neither do the people who lost billions. The only ones who made out on this GM IPO are the unions and perhaps some fat cats on Wall Street.

December 01 2010 at 9:04 AM Report abuse +10 rate up rate down Reply