The Generational Test for Investing….

One of the simplest techniques to help determine investment merit was actually made by a co-worker of mine.

A couple of colleagues and I were discussing investment styles and strategies that had served them well over the years. One was oriented to short-term speculation and trading, another had a longer-term perspective (that would be me). One had a particularly interesting method that worked quite well and he subsequently retired at a young age, so it might pay to listen up! He termed it the “generational investment test” which consists of four questions. He used Coca Cola as an example. 1) Did you drink Coke (or other Coca Cola products) as a child? 2) Do you still drink Coca Cola? 3) Do your kids drink Coca Cola and lastly 4) Did your parents and grandparents drink coca cola? If you can answer yes to all four questions, then the company merits strong consideration for purchase. He reeled off some of his portfolio… Hershey’s, McDonald’s, Walgreens, J.M. Smuckers, Exxon Mobil. We applied the test to all his picks. Who hasn’t been in a Walgreens? Who hasn’t eaten a Hershey Bar or filled their tank at an Exxon station? It’s no wonder this guy left the workforce with a 7-figure portfolio LONG before he was eligible for social security.

So, the question beckons: can the generational test be applied to healthcare issues? The answer is a resounding, “Yes.” Let’s start with Johnson & Johnson. I used many of its products as a kid (my motorcycling and kickboxing pursuits always lead to injury, and thus the need for band aids, Tylenol and other products.) I use the products now and I will use the products for the rest of my life. Ditto for my parents. And while I have no kids, I would certainly have covered their boo boos with JNJ band aids and washed their hair with JNJ baby shampoo.

Johnson and Johnson has done more for my retirement and financial security than any other single investment in my life. I held it for 23 years and plan on holding it for another 23. Becton Dickinson is another great company that has been in business for nearly 120 years and would pass the generational test easily. I have no doubt that JNJ and BD will be around in 20 years. I wish I could say this about all my investments, whether in the healthcare sector or not.

Dave Lerman and Jodie Warner


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