When I hear investing likened to gambling, I sigh. There’s a huge gulf between betting on horses and, say, investing in FTSE 100 shares. I also quote legendary US fund manager Peter Lynch: “Although it’s easy to forget sometimes, a share is not a lottery ticket…it’s part-ownership of a business.”
The FTSE 100 isn’t for gamblers
Gambling usually involves being on the wrong end of the cruel and unbending laws of statistics. Buying shares in, say, a FTSE 100 firm means becoming a co-owner of that firm. If you choose wisely and your company does well, so too will your shares.
Furthermore, I dislike bargain-hunting for what I’d call ‘cheap and nasty’ small-company shares. In my long experience, they usually involve too much nasty and not enough cheap.
This FTSE 100 share has crushed crises since 1865
During the steepest market crash in UK history, I’ve been ultra-cautious when stock-picking. As the coronavirus crisis is far from over, I look for businesses that I think are practically bombproof and able to withstand the most severe downturn.
One share lurking on my radar is HSBC Holdings (LSE: HSBA), a global bank among the FTSE 100 mega-caps. With a market value of £85.7bn, HSBC is by far the biggest bank in the FTSE 100, yet makes the bulk of its money outside these shores.
In business since 1865, HSBC is not an exciting investment. In fact, I’d describe this as one of the FTSE 100’s dullest shares. But, in times of crisis, dull can be attractive. For example, during the global financial crisis of 2008/09, I put my life savings on deposit with HSBC. My thinking was that if HSBC’s ‘fortress’ balance sheet failed, then there wouldn’t be any banks left standing!
HSBC shares have nearly halved since 2018
Despite HSBC being a ‘boring’ bank, its shares have seen plenty of far-from-dull price action. In January 2018, they hit 792p but now stand at 423p, almost halving (down 47%) in 30 months. Similarly, HSBC shares are down more than a third (34%) over the past year.
Notably, HSBC shares kept falling long after 23 March, when the FTSE 100 hit its 2020 low. HSBC’s 2020 low came when its shares dipped below 370p on 29 May. Since then, they have staged a modest recovery, rising 14%.
Obviously, there’s no point in discussing HSBC’s fundamentals. Thanks to Covid-19, earnings predictions have been withdrawn. Also, the bank suspended its dividend – a rock-steady $0.51 (40.3p) a year since 2015. When this current crisis abates, I expect it to resume paying dividends. Even a reduced yearly dividend of, say, 30p would equate to a future dividend yield of 7.1% at today’s price.
In short, if you enjoy gambling, then fritter your money away on roulette or sports betting. If you prefer to invest long-term in businesses that weather every storm, then I think you shoudl add this ‘dull’ FTSE 100 share to your portfolio!
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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.