Investing in an investment company is different to investing in a manufacturer or service supplier because the business is designed to take investment positions that may take longer to pay off and the focus is on long-term returns. Like a property investor, you pick up the real bargains in price when the market is at its lowest, but then you have to wait for the market to recover to gain the true benefit, so timing and decision making are the keys to success.
That's why Washingon H. Soul Pattinson and Co. (ASX: SOL) has been so successful over its long history. It has stakes in a variety of investments covering financial services, telecommunications, pharmaceuticals, equities and basic commodities like building materials, coal, copper production and processing.
It also has a controlling shareholding of almost 60% in New Hope Corporation (ASX: NHC) and at 31 July, 2013, it had 100% ownership in four unlisted companies. New Hope contributed less earnings in 2013 due to lower coal prices and a higher Aussie dollar, so if the coal price improves and dollar falls, 2014 should be a better year.
One investment that has paid off handsomely is TPG Telecom (ASX: TPM). Soul Pattinson held a 26.9% stake as of July 31, 2013. Since then, TPG's share price has risen 47.4% from $3.67 to $5.41.
Another development that began in 2013 was the creation of its 100% owned Australian Logistics Property Fund, designed to develop and own retail distribution centres (DCs) for lease to major tenants across Australia. It deftly saw the growing need and desire of large retailers to streamline and expand supply chains. The ready market for DCs coincides with a recovering Australian economy.
Two DCs have started development and have lease arrangements with Super Retail Group (ASX: SUL) at locations in Erskine Park, NSW and Brendale, QLD. Super Retail Group operates brands like Supercheap Auto, BCF, Rebel Sports and Amart Sports. It's a top 10 retailer domestically and is continuing its expansion nationwide.
Foolish takeaway
Since 1969 the company has a compound average annual total shareholder return of 14.1% and although there may be some years when earnings are flat, there are others where earnings swell from the occasional sale of investments. Over the long-term shareholders have benefited greatly. "Time in the market" rather than "timing the market" is the simple mantra of success. A top-performing stock like that in a portfolio would help you ride out the bad times and pay for your patience in the good times.
