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The "Doom and Gloom" Hype Is Creating Fire Sales in These StocksBy
Monday, July 30, 2012
It's easy to be swept away by fear.
The European debt crisis is escalating. China is slowing. And people are still worried about a U.S. recession.
But if you're at all familiar with my work, you know I don't buy into "crisis and collapse" stories. In fact, over the last several years, I've shown you how to buy into times of fear and panic... to make big, safe returns.
When municipal bonds collapsed in 2011, for example, I told you, "If you can ignore one of the media's biggest sources of hype, you'll see there's an amazing opportunity for income investors right now." Since then, you've had the chance to make as much as 95% owning municipal bonds.
There's a similar situation setting up right now. You're not going to like it. But that's why I think it's going to be a big opportunity...
Two years ago, when investors were panicking about the future of America, I told my readers about a unique way to protect their wealth from what they saw coming...
I told them to own the world's best dividend-paying companies that earn a big chunk of their profits in foreign currencies.
Here's what I wrote:
Take Coca-Cola (NYSE: KO) for example. The giant beverage company gets about three-quarters of its revenue outside of North America. It's huge in China and India. At the time, it yielded almost 3%. And it had a huge cash hoard.
The risk here was minimal. And since my essay, investors have made 30%, including dividends.
We can make a similar bet right now in Europe. Despite all the fear and hype surrounding Europe, the continent's best companies are still making money.
I'm talking about companies like AstraZeneca (NYSE: AZN), Britain's second-largest drug company. You've probably heard of Symbicort (asthma medication) and Crestor (lowers cholesterol), two of AZN's most popular drug brands. AZN is the type of shareholder-friendly company I like. It's been paying a dividend since 1985 and currently yields 8.6%.
Right now, AZN trades at a price-to-earnings ratio of just 7.1... That's cheap compared to the S&P 500's 14. And if you're worried about the crisis in Europe, 68% of AZN's sales are outside of Europe.
Or maybe you've heard of Total (NYSE: TOT), France's biggest oil producer. It's the fifth-largest oil company in the world, operating in more than 130 countries. And this year, Total announced it has three major projects in the works... in Australia, the Norwegian North Sea, and Nigeria... helping cement its global presence. Like AZN, Total's trading at a low price-to-earnings ratio of 7.1. And with a current dividend yield of 5.5%, it generates steady income for shareholders. (These factors combined mean the company can do well even if oil prices decline.)
Owning companies like these gets you exposure to rapidly growing emerging markets... and still gives you plenty of "sleep at night" peace of mind that your investment is in a stable company with a long track record of performance... operating under a developed legal system that protects property rights... and subject to reasonable regulations.
And with all the fear surrounding Europe, these companies are much cheaper than they should be. Like AstraZeneca and Total, European stocks in general are trading for less than 10 times earnings and pay 4%-plus dividends.
The fear and volatility we're seeing today is creating periodic "fire sales," allowing you to buy valuable assets for pennies on the dollar. Taking advantage of the panic will set you up to make big, safe gains down the road... just like we did with municipal bonds and American stocks.
If you can ignore the "doom and gloom" hype, you can buy some of the world's best businesses at incredible prices.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Further Reading:
Whether you're worried about Europe, unemployment, the election... or if you simply want to earn consistent, low-risk returns... buy "the world's best, safest, most cash-generating businesses," Dan Ferris writes. It's the "ultimate investment idea," he says, and it assures you "all the income you need for the rest of your life."
Earlier this year, Steve Sjuggerud told readers about a one-click way to buy some of the world's best businesses at a steep discount to their market value. Even better, you would invest alongside one of the greatest investors in history. Get the details here.
Market NotesSEVEN YEARS OF COMMODITY PRICES: A FLAT PERFORMANCE With today's chart, we look at the performance of commodities over the past seven years... and note how it's been a flat one.
For many years, investors have worried about inflation... and the rising nominal price of "real stuff" that accompanies it. We can track this worry with the CRB index. The "CRB" is the world's most widely followed gauge of raw-materials prices. It tracks price trends in energy, food, and metals.
As you can see from the seven-year chart below, the CRB was around 300 in mid-2005. It boomed in late-2007/early-2008. It then plummeted during the credit crisis. Since its 2009 low, it has boomed and busted to end up... around 300.
Bottom line: Traders who've timed the booms and busts have made money, but folks who have held long-term commodity positions haven't made a dime.
– Brian Hunt
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