Wealth Accumulated

By D J Thomas, a large-cap stock market value investor and financial writer

PE ratio

The FTSE 100 hits 8000

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City of London

FTSE 8000

The London Stock Exchange has always been a mining/energy-centric exchange which has helped to boost the FTSE 100 over the historic and record-breaking 8000 mark. Putin’s invasion of Ukraine and the fallout from global supply chain issues resulting from the global coronavirus pandemic have helped energy companies listed in London (and around the world) to record profits. The likes of Shell and BP have already seen sharp increases in their share prices as a result. They’re expensive; don’t let their single-digit PE ratios fool you.

UK semiconductors scream for money

And so they should given the massive investment commitments the US government and the EU have made to secure their own supplies of chips. The threat to Taiwan from China has not gone away and they still covet Taiwan’s reunification with the mainland which threatens the global supply chain of chips. iPhones, cars, washing machines – a whole host of everyday electronic items have not been supplied to the market due to the lack of chips and last year’s lockdowns in China. Rishi Sunak needs to announce something soon or risk firms moving operations overseas. The UK’s largest exchange-listed stock, Oxford Instruments, with a high teens ROCE and PER of 26.54 is in growth stock territory. Its half-yearly report showed an almost 18% increase in revenue. Ian Barkshire, Chief Executive said ‘we anticipate higher production in the second half, combined with the positive impact of recent price increases as we convert our record order book. This provides good visibility for an expected improvement in trading in the second half’.

Biden’s bombs

Or tanks. Just keep an eye on Biden’s proposed record defense spending proposals rumoured to eclipse the $858 billion enacted in the 2023 fiscal year. It’s thought that the Pentagon wants to accumulate weapons to refill US stockpiles while continuing to send munitions to Ukraine. I’ll state the obvious: look at stocks in the defense industry that have growth plans beyond the Ukraine conflict and the recent Chinese Balloon shootings. Since a lot of defense relies heavily on tech, defence-orientated tech stocks including cyber security may not go amiss. For example, Lockheed Martin is the US government’s largest defence contractor.

Plus 500 just keeps on making money

The FTSE 250 firm describes itself as a ‘global multi-asset fintech group operating proprietary technology-based trading platforms’. It’s a stockbroker that also allows users to access derivative products such as futures, options, and contracts for difference. Net profit in FY 2022 increased by 19% to $ 370.4 m (FY 2021: $310.6m) and basic earnings per share increased by 25 % to $3.81 (FY 2021: $3.06). Plus 500 has an extremely strong balance sheet. David Zruia, Chief Executive Officer said ‘we are in an extremely exciting strategic and commercial position, with multiple potential growth opportunities available, particularly in the US futures market’.

UK inflation slows in January

10.1% for January versus 10.5% in December the third month in a row of lower CPI according to the Office of National Statistics. Milk and olive oil price increases are making my weekend morning ritual of pancake making even more expensive; as for the eggs required in the recipe, I treat them more like caviar now. Inflation is still at a 40-year high and the Bank of England has already raised interest rates 10 times in a row to 4% with the market expecting rates to rise again when The Bank meets on 23rd March. Remember when inflation was meant to be transitory?

US inflation rises in January

CPI rose 6.4% for the previous 12 months to January 2023 compared with the same period last year. It rose 0.5% for January alone. Shelter, food, natural gas, and filling up your tank were the standout categories influencing the numbers. As inflation stays high, so will interest rates. The market is expecting a 0.25% increase in interest rates at the next Fed meeting scheduled for the third week of March. Dallas Fed President Lorie Logan said ‘we must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions’.

Why Adidas is a relatively unpopular large company

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An adidas trainer, black and white

Adidas reeling from Kanye colab

“The numbers speak for themselves. We are currently not performing the way we should,” CEO Bjørn Gulden said in a press release this week that also alluded to its inability to sell its Yeezy inventory with a potential impact of $1.3 billion. Last October the firm severed ties with Yeezy’s founder Kanye West after his well-publicised antisemitic tirades. In July 2021, shares traded at EUR319, today they’re at EUR139, with a dividend yield of 2.37%, and a PE ratio of 19. Adidas has all the hallmarks of a relatively unpopular large company.

Rinse and repeat

As if we didn’t get it first time around last week when the fed increased interest rates by 25 basis points, Fed chair Jerome Powell at the Economic Club of Washington said “the disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,”. Of the labor market, Powell ‘didn’t expect it to be this strong’ after a 517,000 print for jobs added in January. Those damned workers are just fouling the recovery. “My guess is it will take certainly into not just this year, but next year to get down close to 2%.” That’s a bet I’m willing to take.

Record profits at BP

Like ExxonMobil and Shell last week, the energy sector continues to reap the benefits of lockdowns and Putin’s invasion of Ukraine creating massive demand for oil with BP announcing record profits that more than doubled to $27.7bn (£23bn) in 2022. In the fourth quarter of 2021, Chief executive Bernard Looney said: ‘When the market is strong, when oil prices are strong and when gas prices are strong, this is literally a cash machine.’

A high dividend yield at Barrett Developments

With a dividend yield of nearly 8%, property developer Barratt Developments released its half-year results this week and decided to cut its dividend. David Thomas, Chief Executive said ‘Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing’. Pre-tax profits, earnings, and revenue all increased versus the same period last year. Forward sales were reported as 10,854 homes v 15,736 last year and the firm pointed to the pressure first-time buyers are under, roadblocking a clear pathway to recovery in 2023. Barratt has a PER of 5.78 and a price to tangible book of 1.03.

Disney cuts 7000 from workforce, proxy fight is over

Activist investor Nelson Pelz bought Disney stock at $92 a share in November 2022 for $865 million, launched a proxy fight and now the stock is worth $118 a share – a paper profit of $154 million after his stake increased in value to $1.1 billion. Peltz called off the fight this week after the announcement of a cost-cutting plan to the tune of $5.5 billion and a headcount cull of 7000 employees. Disney announced quarterly earnings per share of 99 cents, beating expectations, and revenue and subscriber numbers that came in as expected. Bob Iger said that “We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders”.

Bellway’s strengthening balance sheet

Like Barratt Developments, Bellway’s forward sales have declined and its customers are struggling with increased pressure from higher mortgage rates. Like all good housebuilders, it has large cash reserves and expects revenue to increase throughout 2023 despite the economic backdrop. ‘As the near-term economic outlook remains uncertain, we continue to take actions to maintain the Group’s balance sheet resilience. The measures include a freeze on new recruitment, limiting land approvals and a highly disciplined approach to production expenditure, as we align investment in work-in-progress to sales demand.’ When interest rates decline, you’ll find that demand for their homes will start to increase. In this climate, its easier for housebuilders to build their balance sheets rather than homes.

UK avoids recession

GDP fell 0.5% in December but that was not enough to impact growth for the final three months of 2022, coming in at 0% growth for the quarter. Last week The Bank of England said that it still expects a recession for the UK in 2023, but at a reduced severity than their previous forecast. The Office for National Statistics said that there were falls in services, education, and transport. Britain is scraping along the bottom quite nicely thank you.

How to use the price-to-earnings ratio to value large-cap stocks

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Man at a desk with phone in hand working on price-to-earnings

If you’re struggling with profitable investing in large-cap stocks, use the price-to-earnings ratio to value large caps to streamline how you actually look for stocks worth investing in.

I’m not forcing you to have a research process, but if you understand what an investment strategy can bring to your investing success, then stick around.

But a word of caution.

The price-to-earnings ratio (PER) is not the holy grail by any stretch, but it certainly makes the job of determining a sense of value for large caps much easier.

And that makes me feel good.

For context, I pursue a large-cap value investing strategy that involves determining what the real-world value of businesses are (intrinsic value) instead of the make-believe values assigned to them by the stock market and its army of commentators.

Pause.

Translation: massive companies like Apple, Microsoft, and ExxonMobil.

Yeah, I buy those.

But only when they’re on sale.

They call it purchasing shares in a business only when they are selling at a discount to its intrinsic value (margin of safety).

I call it a common sense approach to investing.

Wouldn’t you rather determine the actual, real-world value of a business instead of taking tips from an online forum or a talking head from the mainstream media?

The price-to-earnings ratio helps you to get an understanding of the intrinsic (real-world) value of a business AND whether it has a margin of safety (it’s on sale).

Perfect right?

Here’s the best way you can use the price-to-earnings ratio to value large-cap stocks.

How to calculate the price-to-earnings ratio

Before we get to the meat and potatoes, here’s what the PER actually is:

PER = share price, divided by the last reported earnings per share.

The price-to-earnings ratio is a way of appraising the value of a company based on its ability to turn a profit.

Earnings is simply another word for what accountants call net profit, commonly referred to as ‘the bottom line’.

Net profit is all the money a business has made minus the expenses of doing business like rent, taxes, payroll, and insurance.

Earnings per share is the amount of net profit a business has made divided by the number of shares a business has issued to the stock market.

Phew!

Stay with me here because the bottom is that there is no point in you buying stock in a business that does not know how to make a profit.

Yes, there is a slight learning curve to the PER, but if you want back yourself to learn a profitable investing strategy – and you really should back yourself – then you’re already one step closer to successful investing outcomes.

How to value Apple using the price-to-earnings ratio

Apple’s share price as of this post is $148.11 per share:

Macrotrends notes that Apple’s earnings per share over the previous trailing twelve months (earnings from the previous four quarters combined) is $6.11.

One year’s worth of a business’ earnings seems like a pretty good yardstick, right?

Apple’s share price (148.11) divided by its earnings per share (6.11) = a price-to-earnings ratio of (24.24).

Still with me?

Here’s a word of caution.

The pitfalls of the PER and how to deal with them

Many investors despise the price-to-earnings ratio (PER) as a measure of value.

They’ll say things like ‘managements manipulate earnings with accounting gimmicky to make earnings look better than they actually are’.

And they are absolutely correct.

It IS the case that accountants can and do manipulate earnings to make their business look as though it makes more money than it actually does in real life.

Everyone’s a hustler these days.

Also, some businesses are cyclical; their earnings may be extremely low or negative in one year.

In other years earnings may be extremely high.

Cyclical businesses sell ‘non-essential’ goods and services such as Walt Disney (DIS).

Although in my household, a Disney subscription has been essential since 2020.

Here’s an earnings breakdown for Walt Disney from Macrotrends that shows how earnings per share (EPS) can be ‘cyclical’:

10 years of Walt Disney’s annual earnings

Earnings consistency (or lack of) like this makes it difficult to value a company based purely on its earnings from one year to the next.

You’re much better off getting hold of a chart of the historical PER. It will help you to visualise past earnings value and compare it to where a stock is trading today (see below).

The Macrotrends website has historical for Apple as it does for hundreds of stocks.

Its screener is pretty awesome as well.

REVELATION: I hardly ever purchase a large-cap stock more than 20 times earnings.

The higher the price you pay for a stock based on its earnings, the higher the likelihood the stock will collapse in price after you’ve purchased it.

It’s the (value investing) law.

Combining the use of charts with the price-to-earnings ratio

A PER chart will show you where a stock has traded in the past based on its earnings so you can get a sense of where ‘value zones’ are.

Here’s Apple’s PE ratio chart from Finance Charts:

From 4th November 2008 to 25th November 2022

Working from right to left you can easily determine where the PE ratio is (24).

Then as you scan toward the left, you should begin to see that significant troughs at just above 10 times earnings have been the ‘deep value zone’ for Apple over the previous 14 years.

These deep value zones are where Apple stock sold at its cheapest.

Where they had the widest margin of safety between low price to earnings versus its real-world value.

More generally, you can easily determine that a PE ratio significantly below 20 for Apple has been a great place to buy its stock.

So as of the date of this post, Apple stock is too expensive to purchase based on a value investing perspective.

Implementing a value investing strategy with the PER

Just because a share price is too expensive for you to buy at today’s price, doesn’t mean it won’t be at some point in the future.

And this is the very heart of what is means to be a successful value investor: patience.

You can have all the discounted cash flow models and 13F filing reports you want, but without the patience to see a value-based strategy through, it simply will not work out to be a profitable strategy.

You’ll need:

  • patience to wait for the right price
  • patience to do your due diligence on each stock before the purchase
  • patience for the share price to rise in value when bought at a margin of safety, and
  • patience with yourself when, even after conducting extensive research on a business, its share price declines

That’s a lot of patience.

Free-to-use websites like Finviz are a great place to start because they have screeners that quickly list the stocks you want.

the Wealth Accumulated newsletter does the work for you by including updates on large-cap stocks.

Warren Buffett famously said:

If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.

Warren Buffett

THAT’S HOW LONG-TERM THE VALUE APPROACH IS.

Thanks for making it to the end.

If you’d like to master the art of large-cap value investing to drive investing results, sign up for the free newsletter and get notified of when the next online course opens.

How to value the S&P 500 like an expert in 3 easy steps

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How to value the S&P 500

Valuing the S&P 500 is integral to successful global large-cap stock market value investing.

It’s one of the first modules we teach in the Value Investor School because the S&P 500 is the most followed and written about stock market index in the world.

That makes it the simplest index in the world to research and invest in.

Just look at the top ten largest stocks by market capitalisation (at the time of writing).

Market capitalisation refers to the total dollar value of ALL the company’s shares combined.

It reads like a who’s who of the most well-known global businesses:

  • Apple (AAPL)
  • Microsoft (MSFT)
  • Amazon (AMZN)
  • Tesla (TSLA)
  • Alphabet Class A (GOOGL)
  • Alphabet Class C (GOOG)
  • Berkshire Hathaway Class B (BRK.B)
  • UnitedHealth Group (UNH)
  • Johnson & Johnson (JNJ)
  • Exxon Mobil (XOM)

The top five of these stocks represent 20% of the total value of the S&P 500 and some of these names are in the financial press on a daily basis.

So it pays to get to grips with the value of the S&P 500 on a regular basis to either invest in it directly with an index fund or to get a sense of general market valuation.

The importance of valuing the S&P 500 from a value investing perspective

Type the words stock market into your browser or favoured social media channels and you’re bombarded with a thousand opinions on what you should or should do with your money. Sometimes you’ll get stories of the latest stock to collapse in value.

When we come across headlines and news articles from the financial press, they almost always sensationalise the truth as to what is happening to stocks day to day.

How the stock market works in context with macroeconomic events, and how your individual stocks can be affected by rising or declining market values is an important skill set to develop.

The constant wall of noise can be confusing as we’re drawn to seek out ‘expert opinion’ in times of uncertainty whether stocks are rising or falling.

There must be an intellectual safety net out there somewhere.

Luckily, the value approach is an intellectual safety net based on your own balanced, independent research. It is a far better judge as to what to do in any given market scenario than the noise machine from Wall Street.

Financial publications get paid by making you click through to their articles.

Pay yourself first with underpriced value by determining when the S&P 500 is undervalued.

#1 Find out the PE ratio of the S&P 500

A lot of investors balk at the idea of valuing stocks with the PE ratio relegating it to a prehistoric has-been.

The manipulation of earnings by unscrupulous managements and the sometimes lumpy earnings successful businesses produce, yo-yo-ing up and down like no tomorrow, make it difficult to get an accurate valuation of a stock or index based on its earnings.

Or so they say.

Yes, there is also a heavy earnings bias toward the largest capitalised stocks; much of the earnings are concentrated in the top 10 stocks due to their enormous size and global sales.

But I’ve got news for you: nothing is ever perfect in the world of investing.

Successful investors understand that reasoning based on the most accurate information available is better preparation for successful, profitable investing than relying on the opinion of almost everyone.

The number one resource I use for finding out the PE ratio of the S&P 500 is multpl.com, from Rober Shiller, Professor of Economics at Yale University.

When you click through you’ll get a nice chart showing the PE ratio of the S&P 500 from about 1870 to the present day.

#2 Compare the current PE ratio of the S&P 500 to the historical PE ratio of the S&P 500

One thing you’ll notice from the chart is the wild swings in value the S&P 500 has had over the years, especially since the massive liquidity manipulations starting in the 1980s.

Ultimately, your task is to compare the current PE ratio to its historical value.

You do that by noting where the S&P 500 PE ratio is now and where it has bottomed in the past.

The last bottom was in 1980 at 7 and the PE ratio has since made only two major bottoms of 17 in 2006, and 14 in 2011/12.

Put another way, the S&P 500 PE ratio has been bottoming at around 15 over the last 40 years.

Pro tip: on each of those occasions, the Federal Reserve put a floor in and artificially inflated the value of the S&P 500 with quantitative easing and cutting interest rates.

#3 Decide whether the S&P 500 is overvalued, undervalued, or at fair value

For simplicity, I use three gauges of stock market valuation to help them value stocks:

  • Overvalued
  • Fair value
  • Undervalued

You can see why it’s a popular method.

But you can’t get to decide where the S&P 500 is on the value gauge until you’ve done the work and the work tells us that as of the publication of this post, the PE ratio for the S&P 500 is 20 which means it is around fair value.

Why fair value?

Remember the average PE ratio bottom range of 15-17, that is the undervalued range.

It makes sense that 18-20 is fair value range and anything above 20 is overvalued.

Why is 20 overvalued?

Because a rock solid principle of value investing is that we buy stocks and index funds at a discount to intrinsic value (fair value).

One thing to note is that these ranges are not absolutes. They change with economic times such as the recent central bank and government manipulations of stocks since the 1980s.

Ranges play an important role of placing the value of the S&P 500 in context to historical values.

For even greater context, the S&P 500 is heading towards undervalued because the Federal Reserve is in a monetary tightening cycle (raising interest rates and shrinking its balance sheet) and the US is already in a technical recession.

The White House and The Federal Reserve have both tried to redefine what a recession is for political reasons but the truth is that GDP has declined for two back-to-back quarters in a row.

The Federal Reserve also strenuously maintains that rates will rise well into 2023 and well-known financial institutions predicting a global recession in 2023.

Based on the history of how stock market prices perform under similar conditions, the S&P 500 is likely heading lower.

How much lower?

Nobody knows.

That said, you’re job is not to second guess the President, The Federal Reserve, or even where stock prices are heading in the future.

From a value investing perspective, you’re simply defining what the value of the S&P 500 is now whilst taking into consideration the macroeconomic environment of the global stock market.

Publicly available interest rates and GDP data help you with this task.

Over time as you regularly interpret financial markets news flow within the context of a value-first approach, you’ll develop a deeper understanding of how the stock market actually works not from a day-to-day perspective, but from a long-term, low-risk perspective that most market participants do not consider.

You have my permission to take ownership of your own financial success.

Need some help with becoming a smarter investor?

A value-first approach to investing creates a mind free of distractions that’s hard to beat.

Sometimes value investing can still seem bewildering given the never-ending stream of headlines and financial jargon, especially in times of uncertainty.

You may even have struggled with some of the terminology in this post.

That’s okay.

The good news is that you do not have to choose between a financial dictionary and interpreting 1000 opinions a day to become a truly successful, long-term investor.

You can use a value investing framework that respects your time, common sense, and appreciation of what actually matters in financial markets in plain English.

If you want to learn more about making successful value-orientated investments, check out the online stock market investing course.

The most profitable stock market investing strategy of all time

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Profitable stock market investing

I’ve talked for years about how Benjamin Graham, the father of value investing, taught the public a profitable stock market investing strategy without relying on Wall Street or The City to do it for you.

One advantage of a DIY approach to stock market investing is that you will cut out the fees professional money managers will charge you.

They will often charge you fees even when they lose you money in bear markets or they are simply unable to beat the S&P 500, which most of them cannot.

You can simply buy a low-cost S&P 500 index fund in your broker account and make more money over the long term than the vast majority of professional money managers.

But you’re here because you’d like to understand how a more sophisticated approach to making money from the stock market can yield even better results over a long-term time frame.

The Relatively Unpopular Large Company

The Relatively Unpopular Large Company is the name Benjamin Graham gave to a value investing strategy that is simple to understand so that you can start using it once you get to grips with it.

Graham described the strategy as ‘conservative and promising’:

The key requirement here is that the enterprising investor concentrate on the large companies that are going through a period of unpopularity

Benjamin Graham, The Intelligent Investor

The key skill you’ll need to develop is determining that the period of unpopularity is temporary.

But more on that later.

Let’s break down how this strategy works.

Concentrate on large-cap stocks for profitable stock market investing

Concentration on the largest of stock market listed companies ensures that over time, you’ll develop an intuition, a sixth sense within the large-cap space.

Familiarity does not breed contempt in this situation.

Trying to invest in stocks of all shapes and sizes can be done, but we are here to develop a niche skillset in the ‘safest’ part of the market.

For one thing, large caps are the most talked about, followed, analysed, and written about stocks in the world.

This means that your research process on individual stocks going through a period of unpopularity begins with a simple Google search.

More importantly, large-cap stocks and the businesses behind them employ the brightest minds in the world.

That intellectual capital is what Ben Graham was relying on when he said of this strategy:

The large companies thus have a double advtange over the others. First, they have the resources and capital in brain power to carry them through adversity and back to a satisfactory earnings base. Second, the market is likely to respond with reasonable speed to any improvement shown.

Benjamin Graham, The Intelligent Investor

Look for stocks with a market capitalisation of at least $10 billion, many of them being household names familiar to you.

Yahoo Finance, Google Finance, and many other free services will give you this information.

If you’re a European investor then indexes like the FTSE 100 in the UK, the CAC 40 in France or the DAX in Germany offer convenient lists of large caps to research from.

Determine if the period of unpopularity is temporary

Guesswork will not do for this or any aspect of the strategy.

You will need to do some research if all of a sudden your news-feed flashes the headline ‘XYZ large-cap stock has collapsed in price today’.

Here is a starter list of questions you’ll need to answer to help you determine the timeline of unpopularity:

  • Why did it collapse in price?
  • How short-lived is the issue that caused the price collapse?
  • Does it have a strong balance sheet?
  • Has it hit 52-week or multi-year lows?
  • Is the general market in a bull or a bear market?
  • What is the long-term (10+ years) dividend record?
  • How likely will the company ‘turn itself around’ based on what management v what The Street says?
  • What is the PE ratio average over the past ten years (PE10) compared to the PE ratio over the last twelve months?
  • Has the long-term return on capital employed (ROCE) been historically high? (at least double digits).

Some of these questions are abstract and will have no definitive answer.

Some of these concepts like PE10 or ROCE will be new to you and are based on mathematics.

In both situations, the research process is about building a picture of the long-term success or otherwise of a business, where it sits in the current business environment, and how well based upon your research you think the business will turn itself around after a setback.

Learning about PE10, ROCE and other useful financial ratios is part of the process of becoming a better, intelligent, and enterprising investor.

It is the difference between dollar cost averaging with a low-cost S&P 500 tracker (set and forget) or seeking a higher reward for more work.

Sometimes you will not have a clear yes or no answer as to whether the unpopularity of a company will be temporary.

In this scenario, you should simply place the stock on a watchlist and monitor the news flow about the stock.

You would have already done the hard work of researching it, so it’s best not to waste that work.

Keep it on your radar, monitor news about it, and gain a better understanding of the business to determine when it’s time to buy.

Is investing in large-cap stocks a good fit for your mindset?

At the start of this article, I stated that the relatively unpopular large company strategy was the most profitable of all time.

Warren Buffett uses something close to this strategy, with a focus on large businesses that have shown consistent growth and a historically high return on capital employed (ROCE).

Buffett also buys businesses outright and has a vast pool of cash to play with, and combined with his reputation, he creates deals that we cannot.

That said, he is the wealthiest most successful stock market investor of all time and his investing mentor happened to be Benjamin Graham, the inventor of this strategy and the father of value investing.

But before you stride out there on your lonesome, a word of caution.

There are hundreds of articles, white papers, and books written about the best stock market investing strategies in the world.

What the vast majority of them lack is what I call a ‘mindset fit’.

This mindset fit is the distance between a stock market strategy and the way you think as an individual.

If you think you need charts, indicators, and a constant refresh of your broker’s app for stock market prices every 15 minutes then this strategy of relatively unpopular large companies is not for you.

You’ll likely need a short-term trading strategy based on technical analysis.

If you value your time to enjoy what the world offers without having to look at charts and stock prices all day then the relatively unpopular large company is for you.

Most of your time will be spent keeping abreast of financial market news rather than staring at charts and prices.

Value investing is by its very nature long-term orientated so when you actually purchase stock in a large cap undergoing a temporary period of unpopularity, the price may not rise straight away and may even go lower before going higher.

This is exceptionally difficult for most people to accept which is why they feel the need to check stock prices constantly.

Checking the news is a much better use of your time since large caps tend to pay dividends whilst they sort themselves out.

Subscribe to the newsletter so that you’ll not miss another article on large-cap stock market investing and follow along with my own portfolio news and performance because I use this very strategy to make money from large-cap stocks.