Ho! Ho! Ho! Santa’s Got a Brand New Mailbag

Even Santa, with his magical powers, would have trouble wrapping his head around this volume of mail. According to a recent study released by the Radicati Group, a technology market research firm, the number of email users worldwide is 3.7 billion, and the amount of emails sent per day is 269 billion. That means 2.4 million emails are sent every second and 74 trillion emails are sent per year.

Amid this sea of digital debris, your emails to the Mind Over Markets inbox stand out as important. Most of your emails share important knowledge, ask well-reasoned questions, or serve a valuable corrective function.

Christmas Day, when the markets and businesses are closed, is a good time to read letters. Let’s dig into the latest batch.

Momentum trends for the Biden era…

“Thank you for your regular insightful articles. The investment themes you say will do well under the new presidential administration sound great. Is there a unifying theme that perhaps applies to all four?” — David W.

In my recent article (Four Investment Themes for a Biden Presidency), I unveiled resilient themes that will continue to unfold over the long-term, regardless of economic fluctuations or market ups and downs. They are: infrastructure, aerospace/defense, robotics/automation, and renewable energy. If you’re looking for another theme that applies to all four, consider the roll-out of 5G wireless technology.

5G technology provides faster and higher capacity transmissions to carry the massive amount of data that’s generated by the Internet of Things, which is the seamless web of interconnected devices. The companies involved in 5G include telecoms, chipmakers, modem/IP suppliers, and systems integrators, among others.

We’ve pinpointed a company that’s a crucial player in 5G. In fact, without this company’s proprietary technology, 5G would grind to a halt. This high-tech firm is flying under the radar and the time to buy shares is now. Interested in our specific 5G play? Click here for details.

Don’t abandon your plan…

“I’m concerned about market risks during the pandemic. Should I sell my stocks?” — Barbara D.

Generally speaking, no. Investors should never succumb to headline-driven fears. COVID-19 poses a serious risk but it won’t last forever. Economic and earnings growth should gather steam in 2021.

Watch This Video: Running With The Bulls

Despite the coronavirus pandemic, I think we’re on the cusp of a secular bull market. Fiscal stimulus, effective vaccines, and technological innovation should continue to propel stocks higher in the new year. Stick to your long-term goals and ride out the temporary ups and downs.

IRAs: Don’t play it too safe…

“Should I follow the same investment strategy in an Individual Retirement Account that I once did in my 401k?” — Susan D.

Yes. Keep in mind, many investors who roll a 401k into an Individual Retirement Account (IRA) short-change themselves by being more timid than they were in their 401k.

There’s no investment that beats the returns of stocks over the long term. An IRA represents long-term money, so why shoot yourself in the foot by playing it too safe?

According to IRS statistics, about three-fourths of self-directed IRA monies are in money-market funds, government bonds or other fixed-income securities. That defies common sense.

A common “risk-averse” mistake is to put rolled-over IRA money into tax-exempt investments, such as annuities and municipal bonds. These investments already are tax-exempt, so there’s no tax advantage to putting them in a tax-favored IRA.

To make an IRA or 401k really worth it, you’ve got to stay heavily weighted toward stocks, although allocations should grow more conservative the closer you are to retirement.

Read This Story: 7 Steps for Getting Control of Your 401k

It’s crucial to create the right allocations, based on your stage of life and current market conditions. Asset allocation means investing across a variety of asset classes, with the objective of determining the optimal mix of assets for your portfolio to properly withstand, and adjust to, changing market conditions.

Pinpointing value…

“Some analysts warn that stocks are currently overvalued, but how do you define overvalued stocks? I sense that the classic P/E ratio or PEG is not enough. What other financial metrics should be looked at?” — John M.

It’s not just the price-to-earnings or price/earnings to growth ratios. By almost every valuation measure, this bull market is getting pricey. I expect the rally to continue into next year, but we’ll experience dips along the way until projected earnings growth picks up the pace.

Key valuation metrics include the price-to-book ratio (P/B), which indicates what investors are willing to pay for each dollar of a company’s assets; price-to-sales ratio (P/S), which indicates the value placed on each dollar of a company’s sales or revenues; and enterprise value-to-EBITDA, which is determined by dividing a company’s enterprise value (EV) by its earnings before interest, taxes, depreciation and amortization.

The latter allows investors to compare the value of a company, debt included, to the company’s cash earnings less non-cash expenses.

I think stocks have further to run in the coming months. But if you’re getting nervous about a possible correction, you should increase your exposure to defensive sectors. One such sector is utilities. For our list of reasonably valued, high-yielding utilities stocks, click here now.

Got a question or comment? Drop me a line: mailbag@investingdaily.com. In the meantime, have a wonderful holiday.

John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com. To subscribe to John’s video channel, follow this link.