Tell Your Money You Love It
June and July were absolutely amazing months for investors. The S&P 500 ran 11%. At an average yearly gain of 8%, it packed nearly 18 months of upside into two. That's pretty good...
Now, over the last month, we've given about half of that back. Not so good.
I know, that's how the markets work. Two steps forward, one step back. Still, I am not philanthropic about my investments. I do NOT like giving anything back.
Back on July 10 (waaaaay back, last month), the average gain for each and every stock in The Wealth Advisory portfolio was right at 71%.
(Editor's note: I know I drop that 71% average gain stat a lot. But wouldn't you? A 71% average gain for 32 stocks is amazing. Sure, we've had a bull market wind at our backs, but Jason and I are still crushing the market.)
Today, the average gain is 73.43%. (And we just sold two triple-digit winners: Peak Resorts and Twitter.)
That's right: The S&P 500 has gone down, and The Wealth Advisory has gone up. Up is better than down.
How do we do it? I've started to call this the “Un-Secret to My Success.” Because I'm happy to tell you exactly how I do it...
The Un-Secret to My Success
It's a simple formula: Pick the best management teams in sectors that have solid growth prospects. That's as simple as I can put it.
How are the growth prospects for oil? Not very good, right? Demand is basically flat. And that's an improvement over where estimates were a few months ago. Most analysts agree that this year's demand growth (about 1.5 mbd) is about as good as it's going to get.
You wanna know why oil stocks don't rally?
- U.S. shale companies are loaded with debt.
- Drilling is a capital-intensive endeavor. Decline rates for shale wells mean constant drilling is necessary.
- Global oil demand is peaking and likely to fall.
- Oil prices don't rally, even when Iran shoots torpedoes at tankers.
All this tells me not to own stocks.
Could this scenario be wrong? Sure it could.
Electric vehicle sales in China have been falling pretty sharply as the government has pulled back on subsidies. China's EV sales are a big part of the peak oil demand story. If China's EV sales keep falling, the oil story will change.
But do you wanna bet on that? Is being right about something that important?
I like being right as much as anyone else. Pro tip: We are humans; we are wrong all the time. Why make it hard on yourself?
The bottom line is that companies in sectors that are growing have greater opportunity to sell more stuff than companies in sectors that are stagnant or declining.
Once you find a good sector, buy the best.
Would you take your spouse to Waffle House for an anniversary dinner? Unless you're trying to be sure you don't have to spring for any more anniversary dinners, probably not. You show your spouse you love them by giving them the very best. Do the same for your money. Show it you love it by buying the very best.
The best management teams will love your money, too. They will nurture it. They will streamline operations, understand their customers, stand behind their products, grow revenues — and your investment money will grow, too.
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A K.I.S.S. Example
Three months ago, Target (NYSE: TGT) told you what was going to happen. The company reported what amounted to its best quarter — ever. The stock ramped about 7%, from $60 to around $65.
If you've been watching the retail sector for an opening, this was it. And for the record, consumer spending growth has been just fine for a while now, so retail checks the "growing sector" box.
But if you opted to ignore the leaders (Target, Walmart) and buy a real turnaround story like Kohl's, well, I'm sorry I didn't think of this article sooner.
Because just last week, Target had its "told you so" moment. For the second quarter in a row, the company posted absolute blowout numbers. The stock jumped nearly 20% — to over $100 a share.
Seems pretty clear that the initiatives Target put in place have worked out pretty well. (Same goes with Walmart, which has also seen its shares surge over the last 12 months.) And that's what you get when you invest with the best management teams.
I can go on and on with examples like this.
Just about two years ago, Jason and I were looking at cybersecurity stocks. Symantec, FireEye, Splunk — we ran the gamut. We went with Palo Alto (NYSE: PANW), and we've got a 45% gain to show for it.
We could have done marginally better with Splunk. And we could've done a whole lot worse with FireEye...
Point is, don't take your money to Waffle House. Show it you love it, and take it to the best. Here's one of the best we're recommending right now.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.
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