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If You Own These Stocks, You Don't Care About a Market DeclineBy
Wednesday, September 28, 2011
It's almost the "Holy Grail" of investing... an asset group that beats the market with less risk.
Just after the "mini crash" in August, I shared an incredible list of assets with you. They were the assets that "survived" the market's 17% loss from July 22 through August 8. I encouraged you to think of them as beach houses that held steady during a hurricane... while most of the neighborhood was devastated.
This list contained several of the world's best businesses... companies that make "the basics" and pay the most reliable dividends. Coca-Cola was on the list. Cigarette powerhouse Altria was on the list. Colgate-Palmolive and Kraft were on there as well.
While the world panicked, these companies held steady and kept raking in reliable cash flows. It's still a trend you can participate in today and collect a lot of income from. And as I'll show, it's a way to beat the market with much less risk...
Despite recession worries, the plunging broad market, and the European debt crisis, our "survivors" group has climbed since we last checked in with them. Take a look:
During this period, the S&P 500 is down 4% (with dividends). Including its latest dividend payment, our "worst" performer, Pepsico, is only down 2.7%. And overall, we're up 2.8%.
On average, these companies yield 3.3%. And in the past five years, they've raised their dividends an average 42%. Since mid-August, we've collected four dividend payments... and we expect more and growing dividends down the road.
Even better, these stocks are less risky – less "volatile" – than the market as a whole. Volatility is a measure of how much stocks "wiggle around." High volatility means share prices are lurching every which way. Low volatility means the share price doesn't change much from day to day.
Here's how our "survivors" measure up:
As you can see, the market has been almost twice as volatile as our group of stocks. In short, they're a "sleep well at night" alternative to owning an index fund or "economically sensitive" assets like commodities, airline stocks, steel producers, and homebuilders.
Sure, measuring an asset's return over just a few months only gives you a snapshot of how it can perform. But the past few months have destroyed most investors... in a highly volatile fashion. Investors who focused on elite, shareholder-friendly companies have done just fine.
The past few months have simply driven home the point Dan Ferris made a few weeks ago:
And like I said, these elite cash payers are close to the Holy Grail for investors: They're offering higher returns with less risk. If you're considering buying stocks for the long-term, these should be at the top of your list.
Good investing,
Brett Eversole
Further Reading:
You can find Brett's first essay on these stocks – and see how well they held up during the recent crash – here: The World's Safest Dividend-Paying Stocks.
"If you want to make extraordinary returns in stocks, make sure you get paid," Brett writes. "And when it comes to getting paid in the stock market, one strategy works better than any other..." Learn more about this strategy here: Read This and You'll Never Own Another Index Fund Again.
Market NotesDURING TRYING TIMES, TAKE THE LONG VIEW ON GOLD The gold warning we issued in mid-August came at the right time. Prices have fallen from $1,900 an ounce to $1,650. Many "latecomer" gold owners are terrified.
Considering this latest round of price action, we once again encourage readers to take the "long view" on gold.
To recap, Steve Sjuggerud and the DailyWealth team have been bullish on gold for more than eight years. We've published hundreds of essays on the right ways to own it. We even published a book on the stuff. But no bull market runs to the moon without taking a few breaks to shake off as many people as possible. As we warned in August, gold had climbed too far, too fast and had become too popular. It needed a big shakeout.
That shakeout has come. But when we take the long view of gold's multi-year bull market, we see this shakeout is nothing to worry about. We see that gold could suffer a stupendous fall – down to $1,600... $1,400... even $1,200 an ounce – and still remain within the confines of its uptrend.
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