Based on such a scenario, ZAM believes the best strategy is to be long U.S. government bonds and those of sound governments such as the U.K., Germany and Australia. And the firm is invested in gold, which marks the first time Zevin has gone that route during his 40-plus years in the investment business.
"These scenarios we are forecasting are really incredible unusual events, and we've got fairly high probabilities of them," Zevin explains. He adds that like with 2008-2009, we're confronting extremely unusual circumstances. But this time it's mostly revolving around Euro-centric problems, as well as "the world's sudden love affair with fiscal rectitude, when exactly the opposite is what's needed."
Boils Down To SRI
In the case of a double-dip recession, ZAM is betting on high-yield areas such as master limited partnerships (MLPs), telephone companies and utilities and, to a lesser degree, defensive consumer staples. It has core positions in Enterprise Production Partners and Kinder Morgan, two MLPs. It likes AT&T, Rogers Communications and Vodafone. And it owns Colgate, a long-time favorite that's the epitome of the kind of company Zevin likes to own.
"Industry dominant companies are more likely to do what a sector will do," he says.
Zevin notes that high-quality companies with high return on equity and well-established brands that produce consistent, reliable growth often tend to be socially responsible.
"Our natural preference is [for] large well-managed companies which are environmentally sensitive, which have good labor relations, which are law-abiding and do have good community relations," he says. "They are more likely to be much more safe and reliable companies over the long run and less volatile in the short run."
A former investment banker and veteran financial reporter, Ellie Winninghoff is a writer and consultant. Her work about responsible and impact investing can be found at: www.DoGoodCapitalist.com. She can be contacted at: ellie.winninghoff (at) gmail.com