On Monday, the markets collapsed over 700 points as the trade war began to look more and more like a currency war in the making.
The U.S. declared China a currency manipulator after that nation allowed its currency to decline sharply.
I view it as fairly unlikely that China cares what we think at this point in the game.
It’s clear that the top officials in that nation believe they can win the trade war.
This could get uglier if neither side blinks sometime soon.
So naturally, we should panic and begin selling stocks short, or rearrange our portfolios and make all sorts of short-term decisions and adjustments.
Maybe we’ll buy some puts in case the world ends tomorrow, or sell all our banks right away because more interest rate cuts would mean the end of the world.
We should probably check our stock prices a lot and set trailing stops to lock in smaller losses just in case this all goes over the cliff in a proverbial handbasket…
But we’re not going to do any of that. You know that isn’t how we do things around here.
Putting an All-Star Defense on the Field
On Tuesday morning, I did get to my desk a little earlier than usual.
I’d like to tell you that it’s because I was going to get a head start on the day, figure everything out, and have protection strategies in place before the markets open.
That sounds good, but the truth is the winds were blowing from the east instead of the usual western gulf breezes, so we had thunderstorms in the morning instead of the evening.
I had my coffee and did what I always do when we get a big selloff: I ran up my list of set it and forget it stocks.
These are companies that pay good dividends and are buying back a lot of stock in the open market.
They all have solid fundamentals – their balance assets are rock solid, and they are returning piles of cash to their shareholders right now.
Specifically, the companies that qualify for the set it and forget it portfolio have to be paying a dividend of at least 3% and have reduced their share count by at least 4% over the past year.
The market cap has to be over $10 billion.
We only want to have the biggest, strongest, and best companies in the portfolio.
We buy these stocks and walk away from the portfolio.
We don’t do anything for a year. At the end of the year, we come back and conduct the entire exercise again.
When we buy these set it and forget it stocks, magic happens.
We do better than the markets in the good years, and we do much better than the markets in the bad times.
In bad markets over the past 20 years, index fund investors saw their accounts decline on average by four times what the set it and forget it investors experienced.
In good markets, their accounts rose by about 12% more than the index crowd.
The set it and forget it portfolio is pretty much the Alabama Crimson Tide of portfolio management.
On offense, they will do better than you, and on defense, they will annihilate you.
Neither the offense of the defense will make any major errors.
This is the type of portfolio I used to set up for my clients that traded for a living. They were focused on growing their trading capital and needed to stay inside their short-term profit capturing systems.
The last thing they needed was to spend a minute worrying about their long-term retirement accounts, or college fund.
We would use some version of set it and forget it so they could go about their business with a high degree of confidence their long-term assets were growing at above-market rates, and they wouldn’t see them disappear if markets crashed.
Right now, all of the big banks make the set it and forget it list.
The results of the last round of stress test results are going to increase dividends and buy back massive amounts of stock in 2019.
Now I’m a big fan of a great defense being an excellent offensive weapon, but as the conditions in the market change, we always have to adjust our strategies. That’s what I do in my trading research service, Heatseekers. There I apply my more than 30 years of experience in the industry and game-tested strategies to bring my readers the best opportunities to grow some serious money in any market.
My history speaks for itself. In the five years before I joined Money Map, my published recommendations had 119 wins, and closed 0 losers – averaging 70% returns along the way.
If you want to put together a portfolio that’s going to excel in all phases of the financial game and put you on the road to the Investors Hall of Fame, I can show you how right here.
Prime Targets You Won’t Forget
If I had to pick just one of the four big banks, I would go with Jamie Dimon and his team at JP Morgan Chase & Co. (NYSE:JPM).
I think they have the best balance sheet and the most talented management in the large-cap banks right now.
The stock is yielding 3.4% and their plan is to buy back $29.4 billion worth of shares between July 1, 2019, and June 30, 2020.
That’s over 8% of shares outstanding and should provide a floor for the stock price over the next year.
But it isn’t all banks and financials in the set it and forget it portfolio…
AbbVie Inc. (NYSE:ABBV) has seen enough recent selling that their shares are now a high-yielding stock.
The shares of the large drug manufacturer have dropped almost 20% this year and now yield over 6%.
In the last year, they’ve also repurchased about 6% of the outstanding shares of the company.
The market’s not too excited about their deal to buy Allergan PLC (NYSE:AGN), but less than seven times post-merger earnings, and a 6% dividend are too tempting to pass up.
Insiders agree, and they’ve been aggressively buying shares in the open market recently.
Everyone Needs Healthcare
Cardinal Health Inc. (NYSE:CAH) also makes the set it and forget it portfolio.
Cardinal serves as a middleman for thousands of drugs and medical devices, and it has been a great business for them.
They have raised the dividend for 22 straight years and have not reduced the payout in 30 years.
Right now, the stock is yielding 4.2% and bought back 4% of its shares over the last year.
The set it and forget it strategy is perfect for those accounts you want to grow at a better than market rate and not lose any sleep at night worrying about what market conditions might do to their value.
To the Max,