As Bitcoin Fades, Income Starts to Shine
Six months ago, I made a prediction that the price of Bitcoin would drop by more than 50% before this year was over.
As luck would have it, the day I made that prediction – December 15, 2017 – coincided with the all-time high water mark for Bitcoin when it sold for $19,870. Last weekend, the cryptocurrency traded below $6,700, a decline of 66% in only six months.
That didn’t take long.
I went on to say that “a drop of 90% isn’t out of the question since that would put it back to where it was only seven months ago.” I don’t know if Bitcoin will trade below $2,000 this year, but I wouldn’t bet against it.
That’s because the same mindless speculation that drove Bitcoin to unsustainable highs last year is gradually being extinguished by this year’s steady drumbeat of disconcerting economic news.
While a stubborn cadre of amateur investors still clings to the hope that adding $1.5 trillion to the federal deficit in the face of trade wars and rising inflationary pressures will not bring on a recession anytime soon, professional investors are already making their move.
In short, income is cool again.
Especially dividend income from undervalued stocks, which have started to heat up. The signs are everywhere:
- Over the past month, the ALPS Sector Dividend Dogs ETF (SDOG) gained 8% while the SPDR S&P 500 ETF (SPY) is up only 5%;
- The retail sector, given up for dead a year ago, is on a tear as evidenced by a 16% rise in the SPDR S&P Retail ETF (XRT) during the past ten weeks;
- According to Lipper, equity funds (excluding index-heavy ETFs) had net outflows of $1.7 billion last week after having net positive inflows over the previous three weeks.
Add it all up, and what we are witnessing is a systematic rotation out of high-multiple growth companies into high-yield value stocks. I believe this week’s dysfunctional G7 summit, further alienating the United States from its closest allies and trading partners, will accelerate this trend.
The good news is, it’s not too late to cash in on the market’s next big move.
There are dozens of stocks in the early stages of recovery, trading at valuations far below the market averages. Throw in a dividend yield of 2% or better, and you have the makings of a defensive portfolio that should hold up under pressure much better than the typical growth fund.
Currently, there are 142 stocks in the S&P 500 with a dividend yield above 2% that are priced at more than a 20% discount to the index average based on forward earnings. Of those, 33 earn a score of 8 or higher from my IDEAL Stock Rating System (on a scale of 0 – 10, higher is better).
Of course, not every one of those companies will beat the index over the remainder of this year. However, successful stock market investing is not an attempt at perfection. Instead, it is an exercise in putting the odds in your favor by using a proven system for identifying companies more likely to perform better than the overall market.
P.S. There’s an old adage among top-tier traders: Your network is your net worth. Those words certainly apply to my colleague Linda McDonough, chief investment strategist of Profit Catalyst Alert.
As someone with nearly three decades of hedge fund experience, Linda is one of the best-connected investment analysts you could find. And that human touch makes all the difference. Since launch, PCA has delivered large and consistent gains to subscribers, including payouts of $3,525 in two days, $3,630 in three days and $6,390 in nine days.
Linda can accomplish what mindless trading algorithms can’t — apply her insider knowledge and Wall Street contacts to hone in on profitable opportunities that the investment herd misses.