Why I’m Still Looking for Special Situations Plays in 2024
It’s been hard to get back to my usual routine after being in Vegas last week. If Vegas is the city that doesn’t sleep, then neither would I. So, every night I explored the city into the wee hours of the morning. And there’s still a list of places I want to see the next time I’m there.
I was in Vegas for the MoneyShow/TradersEXPO where I spoke on Friday. In the afternoon, I was on a panel where I shared my top five picks for 2024.
Earlier that day, I presented my ideas on “How to Triple Your Yield Without Excessive Risk” in a breakout room.
That’s a tall claim, but it’s easier to do than you might think. The S&P 500 dividend yield is just 1.4%. To hit a triple, you need to find a yield of 4.2%.
Regular readers know that I sort dividend stocks into two buckets:
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Bedrock Income Stocks are those we use to build long-term wealth. We could potentially hold these stocks forever, and we reinvest the dividends to reap the power of compounding.
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Current Yield Stocks are those we own to earn additional income streams right now. These generally have higher yields than the Bedrock stocks and we hold them for only as long as it makes sense.
Every stock but one in the Current Yield section of the Yield Shark portfolio has a yield higher than 4.2%. For many of these stocks we locked in higher yields due to a special situation with the company or the market. I will continue to use this strategy in 2024.
Still Adjusting to the Post-COVID New Normal
News about COVID appears less and less in the mainstream media. But its effects are here to stay.
In 2020, companies and consumers were forced to quickly adapt to the COVID economy. Back then, I had never had my groceries delivered. As grocers started to limit the number of shoppers inside their stores, and lines and wait times grew longer, I tried it out.
I also became a remote worker. At the time, the company I worked for did not allow anyone to work remotely under any circumstances. And now, on the other side of the pandemic, they have a handful of employees in a small office… everyone else works remotely.
I’m sure you had to make changes in your own lifestyle over the last four years. As a society, we didn’t keep all of our COVID habits, and collectively we are finding what I call the post-COVID new normal.
Companies had to adapt as well. Their very survival depended on it. Management teams were scrambling to figure out what the future would look like… and what resources were needed.
Intel, for example, had to slash its dividend. The consequences of rewarding shareholders instead of reinvesting that money into R&D had caught up with it. That’s the real reason tech companies don’t pay higher dividends. Staying ahead of your rivals requires investing heavily in the business.
I’ve seen many companies decide they need to go back to the basics. They refocused on their core business and launched transformation plans to protect sales and profits.
And my readers and I have been using this to our advantage. Here’s an example.
How We Grab “Quick” Gains with Beaten Down Stocks
Looking to score “quick gains” isn’t a typical phrase in my vocabulary. I’m a dividend investor. If a company has a solid and growing dividend, I want to hold it forever. Even our short-term positions are usually held for a year or two. Here’s what I mean.
In March of last year, I recommended shares of International Business Machines (IBM) to my Yield Shark readers. Last week, we sold them for a gain of 47% in just 11 months.
During COVID, IBM made it clear that it was all-in on AI and hybrid cloud. It began to sell off pieces of the company that didn’t fit into that model and add new ones that did. Investors were skeptical, and the stock’s yield hit 4%. I didn’t think I would ever see a yield that high for this tech giant.
But, investors finally realized the potential in a refocused IBM after its last earnings call. Shares jumped higher, and we took our gains off the table. That 47% is equal to 10 years of dividend income that we pocketed in under one year.
You can always find these types of situations in the market for one reason or another. Sometimes it’s legal troubles that have investors nervous. Sometimes it’s the launch of a restructuring plan. Regardless of the details, you can still find opportunities to cash in on companies exploring their post-COVID new normal.
So, if you see a company you like and it’s undervalued, don’t let that deter you. You may have just spotted an opening before the rest of the market.
For more income, now and in the future,
Kelly Green
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