|Forbes.com, Winter, 2013. This article was written with Oliver Pursche, the Co-Portfolio Manager of GMG Defense Beta Fund. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and nearly 100 million page views a month.|
If you’re anything like me, you’ve uttered the phrase “If only I had bought . . . back then.” Well, back then may be right now.
The current anxiety—that Cliff legislation was not enough, that a debt ceiling battle is brewing, that Europe will implode, that Europe will not implode, take your pick—coupled with difficult comparisons during the upcoming earnings season may deliver what I estimate to be a six to eight percent decline in the S&P 500 index during January.
However, it’s within this possible “double whammy” that an opportunity lies.
As the chart below shows, since 1980 the S&P 500 has traded in negative territory every single year (a trend so steady, it could challenge death and taxes). More importantly, it has also rebounded to end in positive territory 25 out of the 32 years.
Should this swoon materialize, for investors with conviction and fortitude, there’s an opportunity to buy high-quality, high dividend-paying stocks at very attractive valuations, and possibly book double digit gains.
In anticipation of this, for the Beta Fund I’m focusing on companies that have a strong balance sheet, pay a dividend greater than the 10-Year Treasury yield (currently 1.9%) and have an expected earnings growth rate above 8% for the next five years.
Here are some of my favorite sectors and names that fit the above criteria going into 2013:
Global recovery: Cliffs Natural Resources (CLF), CSX Corp. (CSX)
Housing recovery: Bed Bath & Beyond (BBBY), Kohl’s (KSS)
Technology upgrade: Novo Nordisk (NVO), Cognizant Tech (CTSH)
Food and Beverage: PepsiCo (PEP), Molson Coors (TAP)