I have three core investment beliefs that were tested recently with the Coronavirus and, as usual, they came up trumps — no pun intended!

Let me list them and then I’ll explain why they’re reliable strategies that have never failed me.

Here they are:

1. Invest in quality companies
2. Buy the dips. I’m a long-term investor so I buy more stocks on a dip.
3. I don’t have to pick the bottom because that’s almost impossible to do but I do look for the start of an uptrend.

The Oracle of Omaha, Warren Buffett, has always advised that you need to invest in companies where there is a quality management team. Quality companies become renowned for having exactly that. Two of our best companies are CBA and CSL. Have a look at these charts below to show how they’ve delivered over time.

Which bank?

In the case of CBA, it had to deal with the rigours of the Hayne Royal Commission, the Murray Financial System Inquiry and the Global Financial Crisis. And yet it remains in the top 50 banks in the world. During the GFC, it was in the top 10 banks in the world, primarily because the others fell from grace!

Take in the next two charts and note how these companies have performed over time.

CBA

CSL

What these charts also show is that when these quality companies get trashed by the market (often for external reasons), this is the best time to buy these stocks.

In the GFC, the CBA went as low as $28 in 2008 but by 2009 if you’d bought in at say $35, after the uptrend had shown itself to be believable, then you would have doubled your money, even after the Hayne and Murray made life hard for banks.

Interestingly, Westpac, was an $18 stock in 2009 and today is $17.56. It probably is a buy for the long-term but the bank is certainly not in the same class as CBA and therefore I’d be less inclined to make a big investment in that bank.

On the other hand, CSL has shown itself to be a world class company and historically when the share price has been beaten up, it has been very rewarding to keep the faith.

CSL 2015-2020

This chart shows how each fall from grace has been followed by a bounce back — that’s the sign of a quality company.

Of course, if you invest for the short term, you can be caught out because of government decisions, a rotation out of some sectors because others temporarily become more chase-worthy or there could be a damn virus!

This chart shows why I believe in top companies. When you think about it, the entire S&P/ASX 200 Index captures our best 200 companies as a group. As a group, the many good ones can make up for those that have their short-term or even long-term issues.

This chart shows how over 30 years $10,000 became $141,110 and if the starting investment was $100,000, it would’ve grown to around $1.4 million!

The blue line is akin to the S&P/ASX 200. And despite all the challenges from the 1990-91 recession, the collapse of Barings, the Asian Currency Crisis, September 11, the GFC and even battles with SARS and Avian flu, quality companies kept on delivering.

When you invest in quality assets (which we do for you here at Switzer), they will come through in the long run. It’s a matter of keeping the faith in strategies and assets that have the runs on the board.