Today we’re bringing you a peek at the latest issue from The Crow’s Nest.
Jimmy Mengel and his readers have done fantastically well for years now. Since 2014, no year has posted less than a 70% gain and they’ve soared as high as 380%. Meanwhile, the open positions are up 94% on average.
Those big gains have come from a variety of sources, like some cannabis companies and some unorthodox tech plays, but at the core of the portfolio is a great list of dividend holdings.
Read on for Jimmy’s latest take on where the market is now and how dividend stocks are faring.
To your wealth,
Adam English
Editor, Outsider Club
Ahoy Crow’s Nesters,
“They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”
This was the warning Warren Buffett gave investors 20 years ago — right before the massive dotcom bubble burst.
“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs,” Buffett wrote in the letter.
“Nothing sedates rationality like large doses of effortless money.”
As we know all too well right now, effortless money is flowing into the system by the trillions.
But I wouldn’t necessarily call this market a bubble. While NASDAQ tech companies like Apple and Google are worth 10 times their revenue, the FAANG stocks are performing well enough to prop up the entire stock market.
While we’ve recently seen these tech companies pull back from their record highs, this is hardly Pets.com territory…
So it may not be so much of a bubble as it is “the new normal” — a tired phrase I hate to employ, but it is 2020 after all. The Fed will continue to keep interest rates as low as they can go (possibly to the point of going negative) and continue the massive bond-buying programs.
Hey, it’s working so far… but who knows how long they can keep it up. That’s why we have so many historically solid, dependable stocks in our portfolio — especially dividend stocks.
Here’s just a taste of our best-performing dividend stocks over the last few years:
- Abbvie (ABBV) 101%
- Abbott Labs (ABT) 210%
- McCormick and Company (MKC) 177%
- Sherwin-Williams Company (SHW) 192%
- Home Depot (HD) 91%
I could keep going, but you get the idea: these solid stocks have had outsized returns, and I stand behind all of the companies above as crucial anchors to any long-term portfolio.
Sadly, many other companies have had to suspend or cut their dividend payouts to free up cash after the virus-based market slide earlier this year. But you know who hasn’t?
Our old friends the Dividend Aristocrats — companies that have raised their dividends each year for at least 25 years. The S&P 500 Dividend Aristocrats lists 65 companies. Guess how many have decreased their dividend? Not a one.
But if you look at the S&P 500 Index as a whole, 63 companies have cut or suspended their dividends this year.
That’s 14% of the non-Aristocrats.
Of the 63 dividend cutters, 56 have suffered double-digit declines and 49 are down at least 20%.
Among the 65 components of the S&P 500, Dividend Aristocrats Index gainers and decliners are pretty much evenly split for 2020, with 33 showing positive returns through Aug. 21.
The entire S&P 500 Dividend Aristocrats Index is down 2.4% this year, which does not sound too hot against the 6.5% return for the broader S&P 500 Index. However, those large technology companies that dominate the index have had an outsized effect on its market-cap-weighted performance.
But for us, it’s been nothing but roses, with very few thorns.
Godspeed,
Jimmy Mengel
Editor, The Crow’s Nest
To get more insights and full issues from Jimmy check out this special presentation from The Crow’s Nest.
