It should not be this easy to beat the Dow, but it is. In the last ten years, investors could have used a very simple strategy to outperform the index by a significant level. The strategy is called “Dogs of the Dow”, which is the method of buying the ten highest yielding stocks in the Dow. Over the last decade, the strategy outperformed the index in 7 years and overall outpaced the Dow by 1.7% per year, returning an average of 15% per year for a decade. It also outperformed the S&P 500 considerably.
FINSUM: Who sad value investing is dead? This is a classic strategy that has worked to great effect.
The best thing an investor can do right now is to ignore all the market predictions being released for 2020. Every research department has to put out a prediction, and most of them are not worth the paper they are written on. So what does one do? Invest in dividend stocks. It is an important but preciously little known fact that the lowly dividend has historically accounted for 45% of all stock market returns. They are also tangible and predictable in a way stock prices are not, giving them a crucial place in a portfolio.
FINSUM: An additional stimulus for dividend stocks is that the aging population is hungry for them since bond yields are so anemic. Check out AT&T at 5.3%.
If your natural instinct is to worry about a looming recession, you are not alone. Logic dictates that with the economy and bull market having been rolling for so long, a downturn is inevitably around the corner. However, the chief economist at Deutsche Bank is making the exact opposite argument. Torsten Slok contends that the economic expansion will likely go on for “many more years”. His explanation: “The lack of willingness to spend on consumer durables and corporate capex is also the reason why this expansion has been so weak … And it is also the reason why this expansion could continue for many more years; we are simply less vulnerable to shocks in 2020 because there are few imbalances in the economy”.
FINSUM: We don’t dislike this view, but in our opinion the artificially low interest rates maintained by the Fed have much more to do with the length of this recovery (and its future prospects), than financial conservatism amongst businesses and consumers.
Calm and collected asset manager Vanguard has just made an eye-opening call about 2020. The firm’s chief economist and investment strategy chief, Joseph Davis, says there is a 50-50 chance of a correction in 2020. The market hasn’t seen a correction since December 2018, when it dropped to within a hair of a bear market. Davis says he usually sees about a 30% chance for a correction in any given year. Vanguard says that while investors were too pessimistic about recession chances this year, next year they’ll be too optimistic about re-inflation.
FINSUM: Seems a reasonable call, if rather safe.
Standard Life analyst Andrew Milligan made two great calls this time last year. He picked Microsoft and Equinix as two breakthrough stocks for 2019. They rose 55% and 64% respectively so far this year. Now he has his 2020 picks ready. Milligan says to take a look at Visa, Mastercard, and 5G companies like Marvell technology. He also still likes Microsoft, for what that is worth.
FINSUM: We like the call on 5G. The new tech has sort of been in the background of mainstream investing consciousness, but next year could be when it explodes to the forefront.