Investing like an owner

Instead of looking for the next big thing, investors in the stock market should take an old-fashioned approach, says Phil Dow, director of equity strategy for RBC Dain Rauscher.

Dow, taking a break from visits with RBC Dain Rauscher clients in Reno a few days ago, said he's advising investors to buy stocks as if they're buying the entire company.

Rather than watch every daily move in the stock price of the companies they've chosen to buy, investors should pay attention to the same details as an owner revenue growth, margins, and other fundamentals, he said.

The basis of Dow's investment strategy is this: The companies that will do well in the future are those that have done well in the past.

Investors who seek out those companies and hold them for the longterm more than a year or two are likely to find superior results.

So how do you find those dominant companies? In a new book , "The Citizen Investor," Dow writes that investors should look for what he calls "bulldog companies."

Among their characteristics:

* High quality products and leadership positions in their markets.

* Ongoing commitment to market dominance, a commitment that's demonstrated through spending on research and focus on low-cost production.

* Superior management and financial integrity.

Investors looking for these companies, he writes, should start by looking at revenue growth it can't be manipulated in the same ways as earnings growth and work from there.

Dow suggested that investors also keep an eye on dividend growth.

While recent changes in federal tax law have encouraged companies to pay dividends, companies also have found that regular payouts help build a dependable base of individual shareholders.

And while dividends have been out of favor in the past couple of decades, a study by Standard and Poors found dividendpaying companies have outperformed their peers over the past 50 years.

Investors, Dow said, increasingly see the need to invest for the long-haul as the 401(k) generation understands it's responsible for its own retirement.

And many of that generation, he said, are realizing they'll need to fund an average of 18 years of retirement after they reach age 65.

Investors aren't going to build sufficient nest eggs by sitting on the sidelines or parking money in savings accounts.

In the past 75 years, Dow noted, returns in the stock market have averaged about 10 percent a year.

But if savings accounts won't do the job, neither will get-rich-quick strategies.

"This isn't rocket science," he said.

"If you wait for the guru, you're in deep, deep trouble."