My mentor in this business made a fortune buying stocks when there was blood in the streets. Over his 25 plus years in the business, he made the majority of his gains in the aftermath of complete devastation.
The reliability of his methodology was like a Swiss watch. You could count on significant out performance in his portfolio in the year or two after a severe decline in stocks.
Because of his longevity, we have many different data points covering various economic and market conditions. Starting with the 1970s and the era of stagflation and ending with the terror attacks of 2001 and the dot-com crash.
Through it all, he made money and lots of it. In fact he had no fear as in many cases he was willing to borrow money to buy stocks on the cheap. It may seem crazy, but his track record speaks for itself.
So here we are today in the midst of another market malaise. Blood is in the street, pessimism is at a peak, and the economy is receding. Even worse, unemployment is on the rise, inflation is heating up, and banks are in full retreat on the heels of a credit collapse.
I guess we should all just pack it in!
Not if you are an opportunist or a ChangeWave enthusiast! There is gold in them there hills, and Tobin Smith and his team at ChangeWave Investing have the treasure map to show us exactly where to dig.
Stocks are cheap, and there are bargains to be had in nearly every segment of the market. While it would be very easy to be fearful in this environment, investors need to resist that urge that says wait, and dive into the water with both feet.
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Think about it for a minute. Our economy is incredibly diverse, and though things appear to be bad, they are not devastating. I mean if billions of dollars of lost capital, home price declines, and higher oil prices doesn’t kill the consumer, nothing will.
No this is just a period of digestion and balance-sheet repair. There is nothing on the horizon to suggest that we are falling off the cliff.
So what stocks should we be buying in anticipation of the next rally? Well there are lots of places to go. Tobin Smith’s ChangeWave Investing newsletter has a number of options in his recession-buster portfolio.
In perusing this list one name caught my eye, MFA Mortgage Investments, Inc. (MFA). It may seem counterintuitive to mention a name that participates in an industry that has as many problems as mortgage finance, but that is exactly the point.
While the problems in the industry are quite real, there are many examples of stocks being severely punished by association. MFA is one such stock.
Amazingly, this company has held up relatively well during the credit crisis. It was only in early March that shares of MFA finally succumbed to the pressure having lost half of its value.
Since that time, the company only increased its dividend noting that its loans were performing just fine. At current levels MFA is paying a very healthy double-digit dividend yield.
With MFA, we have a stock that could theoretically double in value over time and while we wait we get paid a double-digit yield.
It really doesn’t get much better than that. Despite the doom and gloom talk, there are plenty of opportunities in the market. My mentor would be drooling over a stock like MFA!
I suggest you do the same.
Forget about the banks and the homebuilders–they’re going to be in rough shape for a long time. You need to focus on the great secular growth areas of the global economy where investors can make some nice profits in ’08. Want in? Just sign up for your 90-day, risk-free trial subscription to ChangeWave Investing!
