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Shelter Shares Driving Investors

Granted, we don’t have the money to invest like we had before…if we had any! However, as people downsize their lifestyles and pay off more debt, they may be looking for ways to invest the extra money they have, somewhere other than a bank that Uncle Sam might decide to close down.

According to an article in the Wall Street Journal, Dorsey Farr, a partner with the Atlanta-based investment advisory French Wolf & Farr, speculates that we haven’t been through anything like the current economic cycle in our lifetimes, and that investors really don’t know how it’s all going to play out. That makes any investment decision and the potential outcomes scary.

The “bunker portfolio” contains stocks in companies who seem immune to economic swings and whose conservative paradigms seem better suited to the uncertain times we live in. Welcome to the world of “shelter shares”—shares of stock in commodities people actually need and not just in those things they want. If one had a portfolio of the top 18 shelter-providing companies, your return would have been up by about 24% this year, compared with the dismal 4.5% decline most other stocks are experiencing.

These stocks represent companies producing such items as bottled water, canned goods, dehydrated broth, gas masks, generators, and baby food. Also included in this portfolio are companies in the health care industry, customer service relations industry, and those that target DIY-type people.

How would you have fared in the marketplace? Here’s a sampling:*

  • Cummins, Inc. – maker of a vast array of power generators was up 66% this year
  • Hormel Foods, Inc – the producer of that kitchen shelf staple, SPAM™, among other long-life shelf staples, was up 12%
  • Airgas, Inc. – maker of hard hats and gas masks, up 40%
  • Ball Corporation – the manufacturer of canning jars, lids, rings, and equipment, up 9%
  • Salesforce.com – a customer relationship management company, up 51%
  • Dr. Pepper Snapple Group – makers of bottled water DejaBlue, up 32%
  • Mead Johnson Nutrition – manufacturers of baby food, up 20%
  • Autozone – auto parts supplier for the general public, up 36%

*Source: Wall Street Journal Online (https://online.wsj.com) accessed September 15, 2010.

Many of these conservative stocks that are performing are steady, dividend stocks.  At least half the companies have increased their dividends to investors this year.

How does that compute in real money? According to MoneyNews.com, ten-year Treasuries are currently returning a rate of 2.48 percent while the dividend yield on the Dow Jones Industrial Average is 2.81 percent. The dividend yield on the S & P 500-stock index is still below Treasuries at 2.13 percent, but the gap is closing.

Investing is always a risky business. So is hiding your money in a glass jar and burying it because the value of that money could be less when you dig it up. There are other commodities out there to invest in as well, such as gold. But for conservative stocks that have weathered the years of financial ups and downs, shelter shares seem one of the least risky ways to go.

Here’s a full list of the eighteen stocks that are out-performing the broader market:

  • Airgas
  • Autozone
  • Ball Corporation
  • C.H. Robinson Worldwide
  • Cognizant Technology Solutions
  • Cummins
  • Dr. Pepper Snapple Group
  • Hasbro
  • Hormel Foods
  • Intuit
  • J.M. Smucker
  • McDonald’s
  • Mead Johnson Nutrition
  • Salesforce.com
  • Stericycle
  • Teradata
  • Ventas
  • Wisconsin Energy

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