Author: Andrew Packer

Income investing

Dividend Growth Investor: Dividend Aristocrats List For 2023

Posted on by Andrew Packer

Income investors tend to gravitate towards companies that pay out increasing dividends annually. Even if the initial yields are low, such as the 1 percent range, growth over time can make up for it.

Plus, companies that grow their dividends tend to have rising earnings. That will lead to a rising share price over time as well. Looking at the S&P 500, a full 67 companies were Dividend Aristocrats going into 2023.

They have all increased their dividends annually for at least 25 years. And despite a rough 2022 for markets, no companies fell off the Dividend Aristocrat list by either reducing, or failing to raise, their dividend payouts.

One company did leave the list, but only because it was acquired in a merger.

This year saw a record number of Dividend Aristocrats, thanks to the addition of three new companies.

One such company is Nordson Corporation (NDSN). It’s a maker of specialty adhesives, coatings, and polymers. That’s the kind of business that can continue growing earnings and profits consistently over time, even if it gets overlooked by investors looking for a big growth story.

Shares don’t yield much, about 1.1 percent. But the company just raised its dividend payout for the 25th consecutive year, from $2.18 per share to $2.60. And shares returned 7 percent last year, even as the overall market dropped.

 

To view the full list of Dividend Aristocrats, including the two other new additions, click here.

Personal finance

Wealthion: The Most Successful Investors Do These 2 Things Very Well

Posted on by Andrew Packer

Investing can mean different things to different people. The general view is that investing is using wealth to create more wealth. That can mean anything from buying and holding great stocks, to trading in and out of rising stocks. It can mean anything in between, or, most likely, a combination of various strategies across a portfolio.

Once market cycles enter the picture, two factors come into play that are crucial for investment success.

The most successful investors look to avoid losing too much money during a market selloff. This can be achieved in several ways. The first is to take profits and raise cash when stocks are rising.

Cash may not have a positive return after inflation, but cash earning zero percent is better than sitting in a stock that gets knocked down 20 percent or more in a bear market.

The second is to have the courage to buy near the market lows. When investors follow the old adage to “buy when there’s blood in the streets,” they get the best bargains. Those who wait for the markets to definitively move higher lose out.

They may miss out on the first 10-20 percent of an overall market rally, but even higher returns on growth stocks.

Investors who can learn how to do these two things even fairly well can substantially beat the market averages over time.

 

To watch the full interview, click here.

 

Stock market strategies

Contrarian Edge: Why We’re Not Celebrating the Vindication of Our Investing Principles

Posted on by Andrew Packer

The market tends to largely define a stock as either growth or value. The past decade was a great time for growth stocks, which saw massive returns. Their performance even helped the overall market return at above-average levels.

In contrast, the past year has been strong for value investors. Concepts like profitability and cash flows have come to light amid some extreme economic turbulence. Those focused on growth saw massive underperformance while value held up relatively well.

Even worse are “investors” who chased into growth stocks after their share prices already had massive returns. They saw an immediate and likely permanent loss of capital by chasing growth stories past their prime.

Meanwhile, value investors tend to underperform growth investors during market rallies. But they more than make up for it during a market decline. Growth stocks get knocked down considerably.

Value stocks may sell off slightly, but will eventually move towards their full worth.

While value is having its moment, these investors are more likely to take the fact in stride. Many value-oriented funds have left the field, given a seeming lack of value and better return potential in growth over the years.

Rather than gloat, value investors find their time is better spent on finding the next value. And in today’s markets, there are plenty more value opportunities than at any time over the last few years.

 

To read the full analysis, click here.

Stock market

Game of Trades: Dumb Money is going All In on the SP500 Rally

Posted on by Andrew Packer

Market rallies tend to start on investor skepticism, with a few brave investors buying in. Institutional investors tend to follow, trying to keep the price from rising as the big dollar flows come in.

As a rally starts to take on steam, retail investors feel confident enough to jump into that trend. Several technical indicators can track this move – which some call the “dumb money” getting in last before prices peak.

Currently, these indicators show that investors are about as all-in as they were back in August, following the market’s rally over the summer of 2022 off the May lows.

That could be a sign of another top. Given the market’s strong performance in the first few weeks of the year, some downside is likely in the weeks ahead.

With economic data showing a slowdown and interest rates still rising, investors should expect the long-term market downtrend to dominate.

The real question on a downturn is whether or not new lows get set. The market’s lows in December weren’t as bad for some companies. And some parts of the market have had a strong performance off their lows in recent weeks.

While a downturn is likely, it will also likely follow the pattern of the past year. A drop lower, a retest of the lows, then a bounce.

 

To watch the full video, click here.

Economy

Wall Street Silver: Everything Bubble Ready to Pop?

Posted on by Andrew Packer

Market returns over the past year have been driven lower as interest rates have started to move higher. While the Federal Reserve states that interest rates will remain higher for longer in order to beat inflation, others see the Fed reversing course later this year.

That’s for a myriad of reasons. The most obvious is a slowing economy. However, rising interest rates will also significantly impact government spending.

That’s because a majority of government debt is financed over the short term. Those costs are rapidly rising as old debt rolls over at higher interest rates. That may create a ceiling in the short term.

The government isn’t alone. Corporations dependent on short-term debt are also susceptible to the dangers of rising interest rates now.

That said, the market selloff over the past year and the high pessimism in the markets could set up for a strong rally later in the year. That has become a reasonable contrarian view at the moment, and holds even if the Fed doesn’t lower interest rates in 2023.

Amid these contrasting views of the markets and economy, central banks have made another unusual move. They’ve become large buyers of gold in the past year, surpassing levels seen in the past.

That could be a sign that central banks are increasingly untrustworthy over the value of foreign currencies. Or a sign that they may expect inflation to last longer than expected. Either way, that could push precious metals higher this year.

 

To listen to the full interview, click here.

Cryptocurrencies

Bigger Pockets: FTX, Fraud, and the Case for Cryptocurrency in 2023

Posted on by Andrew Packer

While both stocks and bonds took a big hit last year, the cryptocurrency space was hit even harder. Major cryptocurrencies lost more than two-thirds of their price. Those who enjoyed the big gains of 2020 and 2021 were devastated by the collapse.

The price drop was made even worse by the collapse of a number of cryptocurrency brokerages. That includes the collapse of one of the largest, FTX.

Cryptocurrencies have been around for almost 15 years now. They’re an emerging asset class. And they’re incredibly volatile.

Every few years, the space has been prone to large selloffs. Many of the early alternative cryptocurrencies have collapsed. The current bear market may result in a similar outcome.

The issue? While designed to move away from the current financial system, cryptocurrencies grew largely thanks to centralized exchanges. That created a third party, such as FTX.

When those third parties get into trouble, they may end up freezing customer accounts. Or, worse, using customer accounts to try and fix whatever trouble they got into.

That’s why crypto investors should store their crypto in a digital wallet, rather than on an exchange.

With crypto here to stay, even if many crypto projects aren’t, investors may want to use the current crypto winter to accumulate big names like Bitcoin and Ethereum.

 

To listen to the full interview, click here.

Income investing

Simply Investing: How a $25k Investment Generates $4k in Dividends Annually

Posted on by Andrew Packer

On paper, dividend investing sounds simple. But getting started is tough. So is staying the course. Dividend investing can provide steadier returns than relying on the ups and downs of the market. But it also requires a different focus.

That said, those who follow dividend investing over the course of an investment lifetime can end up amassing significant streams of income. That can be useful in retirement, as it takes out the risks of having to sell off stocks.

At its core, stocks are a fraction of a business. And a dividend is simply some of the cash generated by that business being returned to those fractional owners. Dividend yields are based on the payout and the price of shares at purchase.

Typically, a company that starts a dividend will have a significant number of shareholders interested in continuing to do so. Most stocks that pay a dividend have yields of 2-3 percent. However, those dividends can grow over time as corporate earnings grow.

Investors can turn a small stake into significant income simply by investing in companies with a focus on dividend growth over time. Staying in a dividend growth stock for longer will lead to higher total income, especially if shares are reinvested over time.

One example of a company with long-term dividend growth is PepsiCo (PEP). They’ve raised dividends for 64 years. While the current dividend yield isn’t high, early investors have benefited from increasing cash payouts.

 

To watch the full analysis, click here.

Stock market

FX Evolution: Smart Money Slumps as Dumb Money FOMOS Stocks?

Posted on by Andrew Packer

Traders can get a sense of how markets are performing by following money inflows and outflows. Big order flows signal the moves of big money – institutions and funds. Typically, these players seek to avoid moving the market too much while accumulating or selling a position.

At the other end of the spectrum are retail investors. Their small investments can cumulatively add up. But it can also be a sign that the big money has already been made.

When retail inflows surge after a stock or index has already moved higher, it may be a sign of FOMO, or fear of missing out. That makes inflows and outflows a reasonable gauge of market sentiment, and when things may have gotten too heated.

With retail investors coming into the market after heading higher since the start of the year, it may be prudent to get cautious.

That’s confirmed by the mixed data coming out this earnings season. Markets have risen in part for expectations of a strong season. And while some companies have fared well, others have not, leading to mixed results.

If earnings come in stronger, markets may still head higher. However, mixed results suggest more caution. Other macro events, such as ongoing increases in interest rates at central banks around the globe, also suggest further caution.

 

To view the full analysis, click here.

Economy

A Wealth of Common Sense: 5 Lessons From an Awful Year For Financial Markets

Posted on by Andrew Packer

2022 was an unusual year for investors. Most likely felt significant pain, given that both stocks and bonds saw double-digit declines. Typically, bonds hold up well when stocks decline. And in years when bonds fare poorly, stocks perform better.

While some may want to simply move on, understanding what happened can avoid pain from a similar situation in the future. Looking at 2022, there are several big lessons.

First, it’s clear that predictions may not always turn out well. Stocks hit a peak on the first trading day of 2022 before trending lower.

Most investors saw the potential interest rate hikes last year as a speed bump amid a strong market. Instead, the size and speed of interest rate hikes ended up fueling a bear market for the first big down year since 2008.

That strong move higher in interest rates also resulted in mortgage rates more than doubling. That’s a significant drag on the cost of home ownership, and may continue to play out with a weak real estate market this year.

Another big lesson is that market leaders don’t stay market leaders. Tech stocks dominated market returns for over a decade. But in 2022, they generally fared worse than non-tech stocks. This lower valuation reflects higher economic uncertainty and higher borrowing costs.

 

To read the full list of lessons, click here.

Stock market

Game of Trades: SP500 Internals Are Flashing a Major Signal

Posted on by Andrew Packer

There are plenty of data points for investors to consider when gauging a market move. When stocks rise on light volume, for instance, it may be a sign that a rally is finishing up as big investors have already bought in.

Another key tend is to look at the advance-decline line. It shows how many stocks are advancing versus declining. It may show that a market rally is being fueled by fewer and fewer stocks.

When only a handful of companies are responsible for a market move higher, a selloff could be imminent. Such a move occurred in late 2021, ahead of the market’s latest peak in January 2022.

In the meantime, the advance-decline line set a new low in December.

Since then, stocks have had a strong start to 2023. However, the data suggests that this might be another oversold bounce, rather than the start of a new bull market.

Even though the Nasdaq didn’t make a lower low in December’s decline, the advance-decline line made a lower low. But, the S&P 500 did not.

That suggests that overall markets may be sorting out opportunities, with tech stocks still susceptible to big swings. All told, the advance-decline line is one of many data points to consider, but it can give an advance warning for a big market change.

 

To watch the full video, click here.