Author: Andrew Packer

Cryptocurrencies

Coindesk: Bitcoin ETFs: The Bull Case

Posted on by Andrew Packer

After a 160 percent return in 2023, bitcoin continued to trend higher amid rumors that the SEC would approve several bitcoin ETFs. A spot bitcoin ETF would be a sign that cryptocurrencies, which have only been around for 15 years, have made it as an asset class.

Many financial providers such as Fidelity, VanEck, and BlackRock have been tweaking their applications in recent weeks ahead of the SEC’s approval on Wednesday. All these organizations see large investor demand.

How much? Potentially as much as $100 billion. The true benefit to a bitcoin ETF is that it would give investors a way to put bitcoin into a 401(k) or retirement account.

While crypto is volatile, it moves higher over time. And capturing part of that move in a tax-advantaged way could prove life-changing.

Plus, given the high volatility of bitcoin, investors looking to increase portfolio risk could build a small stake with a bitcoin ETF. That could help improve their overall returns.

So far, it’s still in the early stages. But with the bitcoin having coming up later this year, 2024 stands to be a banner year for crypto.

And as bitcoin trends higher, demand will likely increase for more diversified crypto ETFs. Altcoins could see a far bigger percentage rally as a result.

 

To read the full bullish case for bitcoin, click here.

Economy

BiggerPockets: Why Now is the Time to Buy a House

Posted on by Andrew Packer

After peaking near 8 percent in late 2023, mortgage rates have been trending lower in recent months. That’s starting to thaw out the housing market, as seen by a rising number of real estate listings. Plus, the spring months are seasonally some of the strongest months for housing.

That could mean interested investors should make the move now, rather than wait for the Federal Reserve to lower interest rates and wait for mortgage rates to drop further.

With rates still high compared to the last 10 years, many potential real estate investors may be on the sidelines. With a new mortgage costing over 6 percent right now, and most existing mortgages are far under that amount, housing inventory has been tight.

That’s why 2023 saw new home construction lead sales over existing homes for the first time in history.

Declining mortgage rates and an unlocking of the housing market should lead to further home price appreciation.

That means investors who sit on the sidelines for better rates may miss out on potential gains. And by the time they’re ready to buy, higher home prices may offset a drop in rates.

Overall, the housing market has gotten ahead of itself, then slowed down considerably as interest rates jumped higher. That trend is likely to reverse this year, and buying sooner rather than later makes the most sense.

 

To read the full analysis, click here.

Income investing

Dividend Growth Investor: Dividend Champions List for 2024

Posted on by Andrew Packer

Not all dividend stocks are alike. Some companies are cyclical, and raise or lower their dividends in accordance with their profits. Some companies raise their dividends, but inconsistently.

Many great dividend paying companies strive to pay steadily increasing payouts over time. Ideally, in line with growing earnings. Today, 145 companies have managed to raise dividends annually for at least 25 years. These companies are known as dividend champions.

At the end of 2022, there were 139 champions. While the total is up by six, two companies cut their dividends in 2023 and were dropped from the list.

Of the 8 new companies, seven are financial stocks. That includes smaller bank companies, such as Cambridge Bancorp (CATC) and Norwood Financial Corp (NWFL).

Cambridge pays a 3.8 percent current dividend, and over the last 5 years has increased its dividend by 6.5 percent on average.

Norwood pays a 3.6 percent yield, and has grown its dividend by 5.7 percent on average over the last 5 years.

The non-financial stock to make the list is pipeline company Enterprise Products Partners (EPD). They pay a 5.3 percent current yield, and have increased their dividend by about 2.9 percent on average over the last 5 years.

Investing in dividend growth stocks may not always translate into a high starting yield. But over time, rising payouts will lead to higher income and higher share prices.

 

To view the full list of dividend champions, click here.

Stock market strategies

Tastylive: 3 Methods to Test if You’ll Blow Up Your Portfolio

Posted on by Andrew Packer

Risk is one of the most important concepts in investing. One of the biggest risks is having a portfolio position lose all its value. For stock investors, diversification is the key to avoid the danger from any single company from impacting their portfolio.

Traders who use vehicles such as options can vastly increase the risks to their portfolio. That’s because option trades can magnify potential returns and losses. And some strategies can wipe out a portfolio with even a small move.

While investing in the stock market carries long-term probabilities, shorter-term trades can be more dynamic and volatile.

Ultimately, traders must look at risk as higher for shorter-term trades, and take a more cautious approach. That means allocating smaller amounts of capital to a trade the less time it has to play out.

Options traders may also want to use tools such as strangles or credit spreads for shorter-term trades. Those types of options strategies can have a lower maximum loss, even if it means a smaller upside.

The best approach for traders is to look at historical trends. Understanding how worst-case losses have played out in the past on a trading strategy can provide a clue.

Given the higher risks of short-term trading, options traders should start small and scale up with their portfolio in time.

 

To watch the full analysis, click here.

Stock market strategies

The Compound and Friends: How to Find the Biggest Winners

Posted on by Andrew Packer

Investors have many strategies at their disposal. While most studies show that long-term investing can work well with passive investments, there will always be an interest in trading.

The best way to trade is to find stocks that have the best chance of winning. That can lead investors to stocks that can beat the market over the span of a year or more. Traders who can get even one big growth stock into their portfolio can vastly outperform the overall market.

First, traders will get their best results when stocks trade over their 50-day moving average. Typically, the 50-day average indicates whether or not institutions are moving into or out of the market.

In short, it creates a simple way of determining if the market is healthy for trading in the first place.

When institutions are buying, chances are most stocks will trend higher too. And the biggest gainers will see those gains during rallying markets.

Next, traders need to get comfortable with selling. Selling can include taking a profit, even if it means risking out on a position seeing a further gain.

Selling at a loss can be psychologically painful, but it can avoid further losses and free up capital for better trades. Cutting losses can be painful, but losses are inevitable. Keeping losses small is a key part for any trading strategy.

 

To watch the full video, click here.

Commodities

SCMP: 3 Reasons the Outlook for Gold Could Glimmer in 2024

Posted on by Andrew Packer

Stock markets trended higher last year, closing 2023 at record highs. Many other assets also broke higher. Only one other asset saw a new record high. Gold.

The yellow metal has had some volatility in recent years. First, it soared during the pandemic. Then, prices moderated, even as inflation rose to its highest level in over 40 years. Last year’s trend higher could continue this year as well.

Several factors helped gold perform well last year. 2023 saw inflation moderate. But ongoing tensions across the world pushed gold higher. And demand remained strong, with central banks posting record purchases.

While inflation is coming down, the U.S. dollar could be on track to weaken against other currencies. That could push gold’s prices up in dollar terms globally.

Plus, rising debt burdens in general make gold a defensive asset to hold. The U.S. debt alone soared to $34 trillion last year amid one of the largest deficits in peacetime. With fiscal policy like that, gold could see more demand as a hedge against fiscal deficits this year.

And new mining supplies globally aren’t meeting today’s demand. That’s a classic recipe for rising prices for gold, even as the metal has hit new all-time nominal highs in recent weeks.

Meanwhile, gold ETFs have been liquidating their holdings as investors have looked for better returns elsewhere. If gold prices continue to trend higher, that trend may reverse, pushing prices up more quickly than expected.

 

To see the full factors at play in the gold market in 2024, click here.

Income investing

GenExDividendInvestor: Dividends and a Long-Term Mindset Help You Win!

Posted on by Andrew Packer

The start of a new year tends to lead to resolutions. But resolve without a plan will likely fail. That’s why when it comes to investing, most of your assets should be invested in a plan. In particular, it should play to the market’s long-term tendency to rally.

And it should offer growing cash flows as well. That’s the power of investing with dividend growth companies over time. It still leaves you with capital for riskier investments as well.

Stocks endured a 20 percent bear market in 2022, then rallied over 20 percent in 2023 to reverse that loss. Over longer rolling periods, it becomes mathematically unlikely to lose money invested in the stock market.

Dividend-paying stocks continue to deliver cash to investors, even during bear markets. And dividends tend to have lower beta, or volatility. Over time, less volatility can lead to better returns, especially from reinvested dividends.

Of course, any single company can fall on hard times. Even fail. That’s why owning a portfolio of diversified companies across a number of sectors matters. Investors who do so with a dividend approach can even use payouts to build new positions over time.

While investors tend to be focused on the market’s returns in a year, a month, or a week, a longer-term approach can lead to great returns over time.

 

To watch the full video, click here.

Stock market strategies

Diamond Hill: Anti-Herd Mentality

Posted on by Andrew Packer

There are plenty of ways to invest. But it’s clear that investors following trends over the past few years have been whipsawed. That includes the market’s rallies and drops over the past few years. And the rise and fall of meme stocks.

Following the herd has only been profitable for those who got in early, and took profits quickly. Even if they didn’t get the exact top or bottom, knowing when to be in and out of a trend has been key.

The herd will continue to move into any asset that looks like it could offer strong returns. That won’t change. But investors who take an anti-herd mentality can buy when others are fearful. Done right, it can mean reaping a big profit.

There are still opportunities to buy beaten-down companies that trade at a discount to their value. And holding for years if necessary for the market to unlock that value.

For instance, while investors are chasing tech stocks once again, particularly AI ones, other sectors are beaten down.

That includes many real estate plays thanks to rising interest rates last year. Even a company with solid growth potential and cash flows, like Extra Space Storage (EXR), looks  undervalued here.

Declining interest rates this year could mean a rally for real estate-related companies. But add in a company that can improve its own prospects, and going against the herd can be a big winner.

 

To read the full analysis, click here.

 

Income investing

Trader’s Insight: “Weaponized FOMO” Takes a Breather

Posted on by Andrew Packer

Investors who pile into the stock market often consider the fact that stocks tend to be the best-performing assets over the long term. Once the stock market has taken off, however, some traders simply pile in.

This is a phenomenon known as FOMO – or fear of missing out. Most investors played right into the FOMO trend with the stock market’s Santa Claus rally in 2023. That seasonal trend is now weakening.

That may not mean a market correction. But it does mean that stocks will likely need to come off of overbought levels. A quick drop and gradual resumption of the uptrend could cause that to happen.

Several reasons could explain why this is happening. First, with the start of a new year, professional investors will rebalance. That means taking some profits on winners, and reinvesting in underperforming positions.

And the past few months have seen a drop in bond yields. That’s because investors expect a sharp drop in interest rates this year. While the Fed is looking at three rate cuts for a 0.75 percent drop, some investors see rates moving far lower.

That’s getting priced into the bond market already. From a yield of 5 percent in October, the 10-year U.S. Treasury bond is now under 3.9 percent.

This market breather may last a few days or weeks. But chances are likely that January will be an up month for stocks overall. A more sizeable decline is more likely around March or April based on seasonal trends.

 

To read the full analysis, click here.

Stock market

FX Evolution: Did the Fed Just Pull the Pin On the Stock Market?

Posted on by Andrew Packer

Stocks started the year in extreme greed mode. While that’s calmed slightly in the first trading week of the year, investors still see a bullish outlook for stocks, at least in the short-term.

Investors largely see upcoming cuts to interest rates as the big driver for markets this year. Historically, it’s been better to buy the rumor and sell the news.

Once rate cuts do happen, news events may suggest a reason for a market decline. Until that scenario unfolds, the uptrend will likely remain in place.

Several sectors look particularly strong at the moment, continuing on momentum from last year. The first sector is the financial sector.

Regional banks showed strength into the end of 2023. That’s in sharp contrast to their selloff at the start of last year.

Utilities also looked strong. These companies sold off sharply over the summer and into the fall. Rising interest rates made the bond-like returns of utilities unattractive.

With the potential for rate cuts in 2024 hitting headlines, utility stocks could see solid returns this year as their yields are driven down.

Overall, the entire market is showing some upside momentum. While that created overbought conditions going into the start of the year, history suggests a solid month and year for stocks.

 

To watch the full analysis, click here.