Author: Andrew Packer

Stock market strategies

Validea: What Kobe Bryant’s Mantra of “Never Get Bored With the Basics” Can Teach Investors

Posted on by Andrew Packer

Great investors have a lot in common with great athletes. There’s an innate skill. But it’s also been honed by years of hard work. Much of that hard work is simply sticking with the fundamentals.

For instance, a golfer who spends no time practicing their putting can have a good leading swing, but still keep hitting over par. It’s the fundamentals that drive exceptional returns.

Several other skills are at play as well. One is dedication to daily improvement. Basketball great Kobe Bryant started morning practice at 4AM, hours ahead of other team members. Putting in the time to make small daily improvements can lead to big work.

Great investors likewise spend time researching and analyzing companies, and keeping up to date on their latest developments. And while they may look for new trading strategies, they’re not looking to reinvent the wheel.

Perhaps the biggest skill is diversification. Great players may excel in one area, but they’re no slouch in other parts of the game. Good investing likewise follows a path of diversification. That ensures that a runaway winner doesn’t overwhelm a portfolio.

And a diversified portfolio ensures overall success, rather than depending on one player who may choke at the wrong time.

 

To read the full analysis, and how to apply it to your investments, click here.

Stock market strategies

Elm Wealth: A Closer Look at “Cut Your Losses Early; Let Your Profits Run”

Posted on by Andrew Packer

Most traders follow a mantra of getting out of a losing trade quickly. That can avoid the permanent impairment of capital, and keep losses small.

The follow-up to that concept is to let a winner ride. Taking a rallying stock out of a portfolio reduces the number of stocks moving up in a portfolio. And for a great company, it can mean leaving one of the best potential winners of an investment lifetime on the sidelines.

While this general advice is followed by professional traders, academics have a different view. If stocks follow a “random walk” and their daily moves aren’t part of a larger trend, then the advice makes little sense.

However, data looking at investing just in a market index versus Treasury bills indicates that investors may want to cut losses early. Such a portfolio outperformed the market by an extra 1.4 percent annually.

Plus, during some of the market’s worst drops, the strategy reduced the total losses by half. That includes the 1929-1932 crash, and the 2007-2009 drop.

The strategy holds up across different asset classes and different time periods.

Investors who still stick with a buy-and-hold approach may want to rethink their strategy. They could get back to profitability more quickly and compound a higher return over time. While some assets may be thought of as a hold forever, that policy should only be preserved for stocks that can continue higher.

 

To read the full analysis, click here.

Income investing

Ari Gutman: 7 Discounted Dividend Stocks to Buy Immediately

Posted on by Andrew Packer

From earnings season and concerns of a slowdown in the banking sector, markets are looking a little more shaky. While investors may want to scale out of aggressive trades, there are still opportunities that play to today’s values.

Most of those values include companies that pay dividends. Regular cash distributions significantly reduce portfolio volatility. And dividends can be used to reinvest in the same company, or to build a new position for a more diversified portfolio.

With rising interest rates potentially slowing the economy, some stocks remain on sale. That includes companies such as Exxon Mobil (XOM).

One of the world’s largest oil and gas players, shares are well off of their highs from last year.

Plus, the company is expanding from fossil fuels and into the lithium space. That will allow the company to play the growth of electric vehicles.

Company insiders have been buyers of shares. And the stock trades at less than 9 times earnings, which makes Exxon inexpensive compared to the rest of the market.

With a dividend yield of about 3.4 percent, Exxon has one of  the larger yields among the oil majors.

That’s just one example of a dividend stock trading at a reasonable value in today’s markets. With more volatility likely in the coming weeks, traders and investors alike can still stay invested with dividend stocks.

 

To watch the full list of dividend stocks to buy now, click here.

Income investing

Praetorian Capital: Playing Inflation Part 2

Posted on by Andrew Packer

There’s been a big slowdown in inflation data over the past year. While that’s good news, investors may want to price in the possibility that inflation will remain high for some time. Getting the last of inflation out of the economy may take some work from here.

Investors don’t have to worry about a big market decline like last year. But inflation lasting higher for longer could lead to a slow market. That’s fine, as long as investors know the strategy to take to thrive.

That strategy is to focus on a company with a competitive durable advantage.

Also known as a moat, the concept focuses on a company’s industry leadership and the quality of its products. That keeps lower-priced competitors at bay, especially in a weaker economy.

A company with a strong moat can raise prices above inflation and not lose much in the way of business.

One classic example is the Coca-Cola Company (KO). The beverage company is one of the best known global brands. And while a single can of Coke is cheap, it tends to be priced slightly higher than that of competitors and far above store brands.

Investors can also focus on hard assets with real cash flows and a valuation that more than covers replacement costs. Those companies can also fare well if inflation stays higher for longer.

 

To read the full analysis, and two additional stock ideas, click here.

Economy

FX Evolution: We Haven’t Seen This Happen to Stocks Since October of 2022!

Posted on by Andrew Packer

Markets continue to show some volatility following last week’s downgrade of the U.S. credit rating. Earnings season has helped some, with some companies handily beating expectations.

For companies without a strong brand, moat, or unique selling point, however, this market remains tough. Thanks to years of above-average inflation, consumers are price conscious. And areas with a lot of competition or a weak selling point aren’t performing as well as companies with a strong brand.

In the meantime, there’s an argument to be made that the past 18 months of increasing interest rates hasn’t really led to monetary tightening.

The ratio of nominal GDP to the M2 money supply still remains above its trendline. While the big jump higher has disappeared, that may simply be a sign of monetary conditions returning to normal.

Meanwhile, the market’s rally year-to-date has encouraged many investors to buy into the stock market. That’s helped fuel the rally. But institutional investors have been willing to take profits.

This divergence is at the highest rate since the end of last year, near the market bottom. That’s when institutions started buying as individual investors started to sell out.

That indicates that we may be in for some turbulence in the coming weeks. And that investors may want to be cautious now.

 

To view the full video, click here.

Personal finance

Data Driven Investor: How Biases Drive Your Investments – Discover Your Type!

Posted on by Andrew Packer

Understanding how financial markets work is just half the battle of investing. Understanding yourself is the other half. And it’s a key component that many investors overlook.

By understanding how you think, it’s easier to avoid risks that you might have otherwise stumbled into. And it may make it easier to build a resilient portfolio that addresses your needs, and can build wealth over time.

Many investors start buying in a bull market. They’re attracted to the rising prices. And in a bull market, it’s easy to make money. That leads to overconfidence, which can lead to big losses. Investors who bought options, under the mantra that “stocks only go up” got burned in 2022.

At the other end of the spectrum, investors who have had some big losses tend to see those happening indefinitely. They underinvest at a time when there are bargains to be bought.

That leads to underperformance when the market trends higher.

Simply looking at where the overall market sentiment is can improve results substantially. Investors can take profits off the table when greed spikes. And they can buy when sentiment is negative.

That may mean sitting on an initial loss. Or taking money off the table while a stock is still going up. But it can also mean avoiding big losses. That turns average investors into great investors.

 

To discover your investment style type, click here.

Commodities

The Daily Gold Podcast: Why Gold is Steady & What Will Trigger New All-Time High

Posted on by Andrew Packer

For the past three years, precious metals prices have trended sideways. Gold has flirted with $2,000 per ounce, near the highs set in the summer of 2020. That’s despite a spike in inflation over the past three years.

Typically, gold prices move in big trends measured in years. The sideways trend of the past few years stands at odds with the rally that started in the metal in 2016, when it slipped to about $1,050 per ounce.

Typically, gold rises on perceived changes in inflation. Investors who pushed the metal higher in 2020, amid government stimulus to the economy, got the trend right. However, gold prices flattened out before it could break to meaningfully new highs.

However, that may change. That’s because central banks have been increasing buyers of the metal. They’re looking to protect the purchasing power of their own currencies. And to avoid the devaluation of other countries currencies.

That demand remains strong. Plus, the lack of major new discoveries will put a damper on future supplies of gold. That could help lead to prices moving higher in time.

These two trends may also explain why gold hasn’t had a major selloff since peaking in 2020, and has remained closer to its prior highs than in prior gold cycles. Investors may want to consider an allocation to the metal before it breaks higher.

 

To listen to the full podcast, click here.

Economy

Bigger Pockets: Institutional Investors are Buying Up Affordable Housing in Droves – Are They on to Something?

Posted on by Andrew Packer

The real estate market is on the verge of shutting down. The massive jump in mortgage rates over the past 18 months has priced out many new buyers.

For existing homeowners, it’s reduced a willingness to move. Why leave a home with a 3 percent mortgage when you’d have to pay 7 percent or more on a new place? While some new homes are being built in some markets, it’s not enough to meet demand.

That’s led to a push for investments in affordable housing. Large investors are getting into the trend, including Nuveen, the investment arm of the Teachers Insurance and Annuity Association of America (TIAA), and Goldman Sachs (GS).

While smaller investors may ignore affordable housing due to low economics, it does offer a recession-resistant part of the market. And, bought at the right price, the steady returns on both price appreciation and income can deliver higher yields over time.

Plus, there’s also government support. So, even if a property has below-market rents for an area, the property owner will receive cash that it needs.

Individual investors can likewise buy affordable housing properties. It even offers one of the least expensive ways to start investing in today’s real estate market.

 

To read the full analysis, click here.

Income investing

Ryne Williams: 3 Deeply Discounted Dividend Stocks to Buy In August 2023

Posted on by Andrew Packer

Most stocks have recovered the bulk of their losses from 2022’s selloff. Some are even making new highs. Fortunately, a handful of companies have lagged the market. They now offer investors the opportunity to buy at a reasonable value without chasing prices higher.

Even better, by buying dividend-paying companies still trading at a bargain price, investors can get a higher starting dividend yield. And with dividend growth, they can come out ahead over time.

With the market rally slowing now, taking a dividend-focused approach can avoid the pain of a market decline now.

One company trending lower lately is Crown Castle Incorporated (CCI). Shares are down about 22 percent so far this year, and 38 percent over the past one-year period.

The company owns and leases out cell towers. Fortunately, it’s a real estate investment trust (REIT). That allows it to pay out sizeable dividends to shareholders.

Most recently, Crown Castle’s drop has pushed its dividend yield up to 5.8 percent. Plus, it’s dividend has increased for 8 straight years. Since most of its long-term contracts have escalation clauses, Crown Castle can likely continue increasing its dividend for the foreseeable future.

Even better, Crown Castle trades at a discount to its peers in the cell tower REIT space.

 

To view the other two discounted dividend stocks that look attractive now, click here.

 

Stock market

Game of Trades: History Shows That This Is Not Sustainable

Posted on by Andrew Packer

While the stock market is closing in on new all-time highs, there’s one big reason to give investors pause. That has to do with market concentration. That’s a fancy way of saying that the market’s moves are now dominated by a very small number of mega-cap stocks.

The last time market concentration was this high occurred during the peak of the tech bubble. And going back further, only the Great Depression saw a higher level of concentration.

Simply put, this trend isn’t sustainable. While the Nasdaq recently rebalanced to take some weight out of the mega-cap tech stocks, the move may not be enough. Historically, market concentration will melt up at a parabolic level before a recession brings valuations down.

That suggests that a major market downturn could hit high-flying tech stocks the most. Given how these companies trade relative to their historic valuations, they could drop even as the rest of the market holds steady. The end result would still be a market correction.

The absence of a recession this year will likely push the big-cap tech companies higher after they recover from the current selloff thanks to the Fitch Ratings downgrade of the U.S. debt market. Since there hasn’t been a burst bubble yet, there’s more room to run. On a valuation basis, today’s mega-cap tech stocks are still cheaper than other concentrated stocks at their historic peaks.

That suggests investors could still make money in mega-cap stocks like Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA). Just watch out for a recession.

 

To view the full analysis, click here.