What Investors and Traders Should Do Right Now

You read Seeking Alpha and you are involved with the market every day. You know what is going on and you are skeptical about the market here with the SPX at 1005. So am I, but that is really irrelevant. I want you to think about another group of investors.

These investors have these common traits:

1. They are underinvested in equities.
2. They see the economy improving both in the statistics they read and from what they see every day.
3. Their credit balances in brokerage accounts, bank savings accounts, short term CDs, money market funds, just aren't earning a satisfactory yield.

These investors are nibbling on stocks. They are causing the market to go up when you think it should be going down.

Now, I am going way back in time and putting on my broker hat. I am going to present an idea to a client who has money in the money market fund earning 0.10%. I am going to suggest that he buy stocks with that money. Solid companies that he knows and companies that pay good dividends.

You can make up your own list, but I am going to recommend:

• Chevron (CVX) 4% yield;
• Johnson and Johnson (JNJ) 3.2% yield:
• Procter and Gamble (PG) 3.3% yield:
• Coca Cola (KO) 3.3% yield;
• Pennsylvania Power & Light (PPL) 4.7% yield:
• Microsoft (MSFT) 2.2% yield;
• Deere (DE) 2.5% yield;
• AT&T (T) 6.4% yield.

You don't need my list, you can make your own, but these are all well known companies with good dividends.

You might note that I am purposely avoiding financials and raw materials companies. They have made big moves off the March lows. This investor is looking to pick up laggards with good yields.

If this is what he is going to buy, this is what you should buy. Well known, solid companies with long term track records and good dividends.

Disclosure: long CVX, JNJ, PG, KO,T, and 84 other stocks/ETFs.

Comments

[Alan Young:]

Am I missing something here? Does this article say anything at all except "buy the stocks I'm long in"?

Aug 20 03:51 PM

[Moc Johnson:]

hmmm.....

Aug 20 03:54 PM

[Victor84:]

He's just sharing what he's invested in. I like the idea of mixing up some solid dividend plays with some small caps and speculative homerun picks. For trading purposes, speculation can even defeat the trend. Corporate, investment grade debt is also very attractive right now.


On Aug 20 03:51 PM Alan Young wrote:

> Am I missing something here? Does this article say anything at all
> except "buy the stocks I'm long in"?

Aug 20 03:56 PM

[Larry House:]

Patience with high quality, good yielding stocks should pay off. As you said, the list could contain many other names, but they illustrate your point. Stocks should not be avoided but quality should be stressed.

Aug 20 04:04 PM

[untrusting ...:]

Ok, but all depends on the price/value you can get them at. Entry price is everything and the odds favor better entry prices in the relatively near future.


On Aug 20 04:04 PM Larry House wrote:

> Patience with high quality, good yielding stocks should pay off.
> As you said, the list could contain many other names, but they illustrate
> your point. Stocks should not be avoided but quality should be stressed.

Aug 20 06:12 PM

[Gerry Sullivan:]

There are many ways to look at the market. One way is that we have made a 50%+ move on the SPX and should have a correction. Hard to argue with that.

But, 11 months ago, the week of Sept 15, 2008, Lehman filed bankruptcy on Monday and AIG was taken over by the US Government on Tuesday evening. Things looked scary. The SPX ended the week at 1255 , 25% higher than today.

The question I ask the bears (and myself) is this: were things better then at SPX 1255 or today at SPX 1007?

Aug 20 07:05 PM

[recession g...:]

the valuations and earnings of '08 are unlikely to be revisited anytime soon for a number of reasons.

super-charged leverage, historically low interest rates, and seemingly unlimited risk appetite amidst an environment of 4-5% gdp growth and 5% unemployment. if you think this is what the american economy is going to look like moving forward, ill definitely take the other side of that bet.

Aug 20 08:03 PM

[buyforeclos...:]

Yes good companies but Oil really should be at 50 bucks and that will hurt Big oil stocks... I know I hear thew 100 talk....

consumer worse off than when oil was at 33

At some point demand has to come into play

Aug 21 08:32 AM

[swaps:]

He's suggesting that people who have been timid the past nine months can start buying - established companies with yields higher than bank accounts. For those who have missed the rally, these stocks would be a logical entry point for them to get their cash wet. Hopefully they are not rushing in before an autumn fall-back.

Disclosure: CVX

Aug 21 10:36 AM

[Old Trader:]

I can't speak to any of the stocks the author listed, except JNJ, which is a core holding for me. Even at the current price, Morningstar, which has a conservative, deep value bias, gives it a 5 star (buy) rating.

If, as more than a few have suggested, the market ends up going sideways, some solid dividend payers will certainly help portfolio returns.

Aug 21 05:11 PM