Rittenhouse: What is sound investing?

Hopkinson: Oh, that’s a good question. I can tell you that I’m not a speculative investor. I’ve tried that back when I was working at GE as an engineering manager of their transformer business in Fort Wayne, Ind. I tried everything while I was there. I tried options, both puts and calls. I tried betting on growth companies. I had some wonderful rides up and some terrible rides down. Over the years, I developed a better understanding of personal finance, and have done pretty well with it.

I buy companies with low price to earnings ratios with products that are absolutely needed in this economy; proven products that are definitely needed by the American public. I like companies that are efficient at what they’re doing and consistent and continuous at what they’re doing. Since I’ve been buying that way, I’ve never been burned. I would call that sound investing.

Rittenhouse: How does an investment like Cinergy fit into your model?

Hopkinson: PSI Energy in Indiana, one of the companies that became Cinergy, had a big problem in the early 1980s with their then half-built Marble Hill nuclear power plant. They had to abandon its construction, due largely to the post-Three Mile Island regulatory environment and reduced energy demand. I did not escape that. The regulators considered the investment to be imprudent. That’s a shame, because nuclear power is really a great way to go as we are now seeing. Nonetheless, PSI had to write off $1.7 billion, which hurt them a lot. In fact, the company discontinued their dividend for a short period of time. But when they had to swallow that imprudent investment and their share price was plummeting, I mortgaged everything and bought more shares. I had faith that it was going to come back. The board brought in Jim Rogers in 1988 to get the company back on track.

When my son was sick with leukemia many years ago, we were living in Indiana. That’s when I first heard the definition of religion that I have loved ever since: “Religion is the vision that stands above, beneath and within the flux of immediate things.” So no matter what kinds of terrible things are going on around you, you know what you believe, and what you believe is based on fundamentals. It turned out investing in PSI was a very wise thing to do, because my investment in Cinergy absolutely paid off. It was a case where too many people panicked and fled; I call those people “hopscotchers.” Those are people who were only there for the short term.

Rittenhouse: So you are a long-term investor, you’re not a hopscotcher or day trader?

Hopkinson: I am not. In fact, Cinergy is a great company. Cinergy produces stable revenues from producing an economical source of energy. That’s good for me as an investor because I have used the dividends they pay to help put my children through college. I look forward to using those dividends in my retirement years.