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Zachary Chippin
Zachary Chippin

ME AND MY MONEY

He invests in companies that people grumble about (but can’t do without) Add to ...

Zachary Chippin, 19

Occupation

University student majoring in business

The portfolio

Includes BCE Inc., TD Bank, Bank of Montreal, Tim Hortons Inc. and Coca-Cola Co.

The investor

Zachary Chippin began investing in stocks at the age of 13, after he “got money as gifts from family and friends.” His father put the orders through in his brokerage account. Mr. Chippin now has his own account, and is also involved in managing his parents’ portfolios.

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How he invests

Mr. Chippin prefers “dividend-paying companies that continue to grow their dividends annually.” Within this group, he screens for stocks trading at price-to-earnings ratios below their 10-year historical average. It’s also important that the companies are growing earnings at high rates and not paying out too much of their income in dividends.

Within the dividend-paying group, many of Mr. Chippin’s picks are companies with products people dislike paying for but can’t do without. “For example, people hate paying bank fees yet they still use their banks. This also applies to the telecoms. They charge rates everyone complains about yet most people still sign up.”

Normally, consumers would take their business elsewhere but if the company has a sustainable competitive advantage – or moat – few worthwhile alternatives exist. So, all the fees and high prices flow through to the bottom line.

In a way, this investing approach is like the one used by legendary investor Warren Buffett. He believes companies with moats offer the best opportunities to investors. One way to tell whether a company has an effective moat, suggests Mr. Chippin, is by how much consumers grumble when they open their wallets to buy its products.

“I read David Chilton’s book, The Wealthy Barber Returns, and this idea came up,” he adds. “I realized that lots of my investments followed this philosophy and I started using it directly to analyze investments.”

Best move

“It’s a toss-up between buying Manulife for my parents at $11 and the Canadian banks.”

Worst move

“It was buying Goldcorp at $45. I exited the position at $30.”

Advice

“Buy companies you hate paying the bills for, yet continue to use.”

Want to share your strategies? E-mail mccolumn@yahoo.com

 

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