The current market sell-off of roughly 5% over the last week or so, is not a time to panic. It actually is a time to make a shopping list to take advantage of some of these dips.
Back in November of 2011, I penned this article at a time when the gloom and doom crowd was calling for an end to the bull market. I contend that we are seeing a another sell off now based on very similar reasons and some newer ones.
- The euro issue is still an ongoing "soap opera."
- New highs have been made in many stocks and folks are taking some profits.
- Investors were looking for reasons to sell at this time, either to re-balance, or to lock in gains going into the election.
- The "fiscal cliff" is scaring investors.
- Analysts have downgraded some old favorites.
I could go on and on with this list, but the point is that the world is not ending and I do not believe for a second that the markets will tank. We could see some corrections in some sectors and there are always risks, but given the modest recovery in the economy, and the election year boost that has happened quite often, I think now is a time to get out that shopping list and pick some stocks that have taken a hit.
To respond directly to the reasons for the sell off noted above, here is my very brief opinion on each;
- The euro issue will continue to be a soap opera. As we have continually seen for two years, they have found a way to print the money and bail everyone out. Read this article:
"Now, information has leaked regarding how the ECB plans to keep Greece on its feet until the next tranche of European Union-International Monetary Fund aid is paid out. The ECB has chosen a detour via the Greek central bank. It will allow it to issue additional emergency loans to the country's banks. These in turn are supposed to use the money to buy up Greek bonds with short maturities. This will scrape together €4 billion, according to the plan."
- New highs means that money has been flowing into stocks that have been sitting on the sideline doing nothing. Those funds will continue to do nothing, or be put to work in equities, which to me are the best game in town. (Check this out)
- We sell to re-balance and we buy to re-balance. We also maintain some dry powder. The dry powder can be used for this kind of moment. (Take a look at this interesting article)
- The fiscal cliff is out there for everyone to chat about and none of us know what will happen. That being said, should we let a tax consequence dictate all of our investing decisions? Especially when we have IRAs and Roth IRAs, etc. (I found this article quite interesting)
- Analysts downgrade, and they upgrade. When they downgrade I buy, when they upgrade, they are behind the rest of us.
What Stocks Are "Ripe" To Buy Or Add To Existing Positions?
Well lets take a look at some charts first:
Not in correction territory but dips nonetheless. The Dow and Nasdaq have dropped about 5% in less than a week, and I would say there are some really nice Dow stocks that pay dividends that could be considered.
The overall S&P 500 has dipped only 2% so the dip has been more pronounced in the Dow stocks.
All this being said, here is what I would consider buying right now:
Johnson and Johnson (JNJ)
They have had a downgrade by Goldman to sell and I believe the stock has overreacted. The company has too much going for it to stay down too long. Now could be a great time to buy some and pick up that 3.6% dividend yield.
Here is my latest article as to many of the key points:
- An enterprise value of nearly $190 billion.
- Operating margins over 25%.
- $17 billion of total cash on hand.
- A "comfortable" dividend payout ratio of 74%.
- A dividend winner for 50 consecutive years of increasing dividend amounts, as well as an continual payments without missing any.
The holiday season is approaching and smartphone sales are still hot. They can only get better during the height of that season. The dividend yield of 4.70% and a dip in the price screams "buy some."
This article gives great depth:
"AT&T's growth engines - wireless, wireline data and managed services - represented 78 percent of total revenues and grew 6.2 percent versus the same quarter a year ago, led by:
19.9 percent growth in wireless data revenues, up more than $1 billion versus the year-earlier quarter
19.0 percent growth in strategic business services revenues
38.2 percent growth in consumer U-verse revenues
Smartphone sales of 5.5 million, exceeding the previous first-quarter record, with about 30 percent of all postpaid smartphone subscribers on 4G-capable devices
726,000 total wireless net adds, with gains in every customer category
Postpaid wireless churn of 1.1 percent, lowest level in seven quarters
Record first-quarter branded computing (tablets, tethering plans, etc.) net adds of 460,000 to reach a total of 5.8 million, up almost 70 percent versus a year ago
Postpaid wireless subscriber ARPU (average monthly revenues per subscriber), up 1.7 percent to $64.46
Wireline business year-over-year revenue comparisons continue to improve
Wireline consumer revenues up 1.0 percent versus the year-earlier period; seventh consecutive quarter of year-over-year growth."
General Electric (GE)
This global monster has been making tremendous strides towards improving all of the business sectors it plays in. At the same time they have reduced the financial sector a bit, as has been their plan, and picking up that 3% dividend yield right now, with a dip in share price, makes sense to me.
We cannot forget my stock pick of the year for 2013, right? Read this article for my in depth analysis, but to sum it up:
Oil and gas
Software and services
Consumer and business finance
Rail technology and innovation
Medical imaging equipment
Water treatment products and technology
You tell me; Is there an area in anyone's life that GE is not a significant part of? The global footprint of GE is apparent, and it is that huge footprint that is the foundation for my selection of General Electric as the 2013 stock of the year."
The Bottom Line
These are the key stocks I have been looking at right now. Remember that panic and fear gets us nowhere. Look at these moments as buying opportunities, to add to or even begin, a well crafted portfolio of dividend winning stocks.