Don't Fear Change, Fear The Psychology Itself And Capitalize

Includes: EPD, KMP, LINEQ, VNR
by: Clayton Rulli

As per Wikipedia: "Fear is an emotion induced by a perceived threat that causes animals to move quickly away from the location of the perceived threat, and sometimes hide" (and press the sell button).

This last week was a seemingly perfect storm of panic due to several announcements by Obama over tax increases, and the fiscal cliff, as it's called. As far as Obama's negative effects on the market simply by taking the podium, it seems some investors have taken notice. While most are aware of the consequences of the upcoming changes and open ended outcomes, the benefits are slim to be accounted for by investors.

With this uncertainty and dark aura surrounding changes in tax "rules" right now, I realized that investors fear change just as much as people fear changes in just about everything in their lives, unless it's a raise in their paycheck. I myself admit I don't like surprises; this is why I generally find myself ordering the same meal over and over again at my local restaurant.

Although there is some definite reality that warrants this fear, many industries and companies probably won't change that much in 2013. This is why I say the only thing investors have to fear about "change", is fear itself. So don't be fearful of changes that are coming by beating up your portfolio after this wicked week of red. I was reminded of the character, Garth, in the movie, Wayne's World:

The best reaction by calm investors is to profit from the market's reaction by buying what's been beaten up most: solid stocks with high yields. Companies in the MLP sector, such as Vanguard Natural Resources (NYSE:VNR), Kinder Morgan (NYSE:KMP), Enterprise Product Partners (NYSE:EPD), and Linn Energy (LINE) are significantly feared by investors because of their tax advantaged yields. Since it's feared their sheltered tax status could be reduced, much of the sector was viciously sold off, which as a result is an opportunity for investors with cool heads to start positions in these solid companies. Other sectors, such as mREITS and high yielding investment funds, have also been beaten down and could be considered.

I say don't fear the uncertainty of change, cherish others' weak minded psychological reaction to this idea. Buy strong companies that have been beaten down in the most beaten down sectors, before the investment community comes to their senses from their fear induced instincts.

Disclosure: I am long KMI, EPD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.