Stock Market Investing When Everything’s Already Gone Up

Stock market investingStock market investing is always a jittery endeavor. With the market near its all-time record high and the interest rate cycle about to change, it’s a great time to be reevaluating equity investment risk. Moreover, it’s a time to consider whether or not what you own in the stock market is actually a good business.

In a slow-growth world where recession and an equity market correction are an easy possibility, owning the kind of businesses that deliver results despite global turmoil, especially when the broader market offers no tailwind.

Investment risk, specifically with regard to equity securities, is of growing importance given where stocks have come from the last several years.

Also Read: Stock Market Investing: Timing Really is Everything


Stock Market Investing: Three Solid Businesses

There are plenty of good businesses out there that you often don’t hear about. This is perhaps because they aren’t the latest technology stock or aren’t creating something new, thus attracting headlines.

Often well-managed, esoteric businesses actually delivering the goods and services that people use on a daily basis can be both profitable and, in many cases, recession-resistant.

If they are old economy and somewhat boring, what difference does it make? If the business is delivering financial growth, then that is the bottom line. Let’s look at three examples of solid, esoteric businesses that are proven wealth creators.

The Toro Company (NYSE/TTC)

Previously in these pages we’ve looked at The Toro Company (NYSE/TTC), a small-cap manufacturer of turf management and irrigation equipment.

This is a steady business; a consistent good performer on the stock market. Plus, the company pays a dividend to stockholders (current yield is approximately 1.5%).

I like this business because the company has a loyal customer base, solid market share, with a steady demand for its products.

Toro isn’t like a fast-developing technology company, but it offers double-digit earnings growth nevertheless. And in today’s world, that’s a tough thing to come by—especially from a mature enterprise which I view as more recession-resistant than a lot of other publicly-traded businesses out there.


Also noteworthy is AAON Inc. (NASDAQ/AAON), a manufacturer of heating and cooling equipment. This micro-cap stock boasts a good track record of growing the business in a steady fashion, while also providing a good long-term record of wealth creation on the stock market.

Kinder Morgan, Inc. (NYSE/KMI)

In the large-cap space, I continue to like Kinder Morgan, Inc. (NYSE/KMI) for income-seeking investors (current dividend yield is right close to five percent). (See “Oil Prices: Where They’re Going and How to Profit from Them.”)

This energy producer’s pipeline and storage business is well positioned to benefit from domestic production. Management has made it a goal to increase its dividends paid every year for the rest of this decade.

This is the kind of equity security where investors can employ dividend reinvestment, thus building a position over time.

Consistent Wealth Creators

Not only have these three companies proven to be good businesses over time, they’ve also proven their worth as equity securities, creating wealth for shareholders in a fairly consistent manner.

While a track record obviously can’t predict the future, I find it’s helpful for equity investors trying to pick and choose in the stock market universe.

In any case, a few esoteric names with proven wealth-creating attributes through good times and bad are useful in an equity market portfolio. With stocks having already gone up tremendously, a little less beta (share price volatility in relations to the broader stock market) is probably a good thing.