Why Every Family Office Should Own Pink Sheet Stocks
Investing in pink sheet stocks and running a family office would seem to be diametrically opposing actions.
Family offices are entities established to assist with wealthy families' investment -- with the main objectives of preserving capital, generating current income, and outperforming the market over the long term.
But pink sheet equities, contrary to the popular view of listing only lightly traded or thinly capitalized entities, are not unworthy investments for a family office or other investors. Some of the best companies in the world, including Nestle (OTC: NSRGY), Repsol (OTC: REPYY) and Volkswagen (OTC: VLKAY) are listed on the pink sheets.
There are also many blue chip companies, a majority of them foreign, listed on the pink sheets.
These firms decide to list on the pink sheets for a variety of factors. There may be requirements of the New York Stock Exchange that these companies do not want imposed on their corporate structure. Legal considerations play a role, too.
Being listed on the pink seets, however, can make a stock harder to buy and research for investors.
That is what makes a pink sheet company ideal for a family office. The resources of a family office can perform the necessary due diligence to uncover gems trading on the pink sheets. After all, no one beats the market investing in an index fund -- and those hired to run a family office are obviously paid to top the market.
Nestle, Volkswagen and Repsol are hardly unknown.
Nestle is the world's largest consumer goods company. At one time, Volkswagen was selling more cars around the world than any other firm. Repsol is a major oil and natural gas firm that has a dividend yield of over five percent and is headquartered in Madrid, Spain.
Due to the inefficiencies of the markets, companies listed on the pink sheets can be bought at discounts.
There is not the volume and analyst coverage that there is for a firm on the New York Stock Exchange. For family offices, that offers the opportunities to buy a blue chip on the pink sheet when it is undervalued.
© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.