{"id":31925,"date":"2023-10-19T15:37:55","date_gmt":"2023-10-19T15:37:55","guid":{"rendered":"https:\/\/innodebt.com\/investing\/4-steps-to-49-returns-by-late-2024\/"},"modified":"2023-10-19T15:37:56","modified_gmt":"2023-10-19T15:37:56","slug":"4-steps-to-49-returns-by-late-2024","status":"publish","type":"post","link":"https:\/\/innodebt.com\/?p=31925","title":{"rendered":"4 Steps To 49% Returns By Late 2024"},"content":{"rendered":"
\n

Last week in this column, I said it was time to buy. Today, we\u2019ll clarify that timeline.<\/p>\n

Buy and hold forever<\/em>? Nah. Not now. Maybe never again!<\/p>\n

To everyone that shook their head at this careful contrarian last week, thinking there is too much uncertainty<\/em> in the world, well, I agree with you<\/em>. The \u201cthreatdown\u201d is real\u2014which is why I\u2019m not interested in holding names until the end of time.<\/p>\n

We have conflict in the Middle East, a still-hawkish Federal Reserve, spiraling government debt and stubborn inflation. The news isn\u2019t pretty.<\/p>\n

That said, precarious markets create short-term and medium-term opportunity<\/em>. There\u2019s no such thing as a good stock. But there is a good setup, and we have that right now<\/em>. So long as we don\u2019t overstay our welcome.<\/p>\n

With that, let\u2019s discuss my four steps for 49% total returns from the safe dividend payers that we all know and love.<\/p>\n

Step #1: Buy Now, Panic Later<\/h2>\n

<\/fbs-ad><\/p>\n

Not to make light of the unfolding war and risk factors, but as contrarian investors, this<\/em> is when we go shopping. We buy panics.<\/p>\n

Blue-chip stocks actually bottomed weeks<\/em> ago. More than $28 trillion<\/em> in stocks sank to new one-month lows on Tuesday, September 26.<\/p>\n

Translation: The big names were being dumped in a fire sale. When everything hits a new low, nobody\u2019s thinking rationally. This was a selling panic on par with the ultimate market lows in October 2022. A complete wash. <\/em><\/p>\n

For us? A \u201cclose our eyes and buy\u201d contrarian moment!<\/p>\n

Fast forward to Tuesday, October 3. The S&P slumped to new index lows. And the 10-year yield hurdled 4.8% in the overnight trading session. It jumped past 4.9% briefly later in the week.<\/p>\n

The collective one-month lows fell<\/em>. Just short of $21 trillion. Bad but less bad\u2014which is when the easy money is made.<\/p>\n

The selling pressure is subsiding. You\u2019re seeing that now. Stocks sailed Monday \u201cout of nowhere.\u201d<\/p>\n

When there\u2019s nobody left to sell, lows are formed.<\/p>\n

Step #2: Buy What? Dividend Payers at Discounts, of Course!<\/h2>\n

Federal Reserve Bank of San Francisco President Mary Daly recently admitted that, thanks to the rising 10-year rate, the Fed is likely done.<\/p>\n

If financial conditions, which have tightened considerably in the past 90 days, remain tight, the need for us to take further action is diminished.<\/em><\/p>\n

Fedspeak translation: The bond vigilantes did our dirty work for us. We don\u2019t need to hike again.<\/em><\/p>\n

The rate hike cycle is effectively over. Which means right now is the time to buy dividend stocks. Before they sail!<\/p>\n

We\u2019ve often discussed the Gabelli Dividend & Income Trust (GDV)<\/strong>, managed by legendary value investor Mario Gabelli, as a top-notch CEF. Today, we have a rare opportunity to buy Mario\u2019s portfolio for just<\/em> 83 cents on the dollar (thanks to its 17% discount to net asset value, or NAV).<\/p>\n

Remember, CEFs have fixed pools of shares, so they can (and do) trade higher and lower than their NAVs, or \u201cfair\u201d values (assets minus liabilities). As contrarians we can step in when they are temporarily out-of-favor, as after a pullback when liquidity is low, and buy them at generous discounts.<\/p>\n

GDV holds blue-chip dividend payers and growers such as Mastercard
\n
\n MA
\n <\/fbs-ticker> (MA)<\/strong>, Microsoft
\n
\n MSFT
\n <\/fbs-ticker> (MSFT)<\/strong> and Honeywell (HON)<\/strong>. These stocks are already cheaper than a month ago, and with GDV, we have an opportunity to purchase them for another<\/em> 17% off.<\/p>\n

These high-quality stocks wouldn\u2019t normally qualify for our CIR<\/em> portfolio because everyone in the world knows they are great shares to own<\/em>. Even though these companies are always raising their dividends, constant demand for their shares keeps their prices high (and current yields low). So, they never meet our current yield requirement.<\/p>\n

GDV gives us a way to have our dividend and enjoy some additional upside in these high-quality dividend shares. The fund pays a sweet 6.8% annual yield monthly!<\/em><\/p>\n

Step #3: Know When to Hold \u2018Em<\/h2>\n

Kenneth Ray (\u201cKenny\u201d) Rogers knew when to hold \u2018em\u2014and fold \u2018em. He bid us farewell on March 20, 2020, sidestepping the societal dumpster fire that was about to ensue.<\/p>\n

You got to know when to hold \u2018em<\/em><\/p>\n

Know<\/em> when to fold \u2018em<\/em><\/p>\n

Know when to walk away<\/em><\/p>\n

And know when to run<\/em><\/p>\n

-Kenny Rogers, The Gambler<\/em><\/p>\n

Today we celebrate Kenny\u2019s life, his music and his wisdom by appreciating the pop a payer like GDV can give us if we buy during times like these.<\/p>\n

GDV is all about timing. When we last held it from October 2020 until February 2022 it rewarded us with 49% returns in just 14 months<\/em>.<\/p>\n

Step #4: Know When to Fold \u2018Em<\/h2>\n

Since we last sold GDV, it meandered through a meaningless existence, losing 14%.<\/p>\n

And by the way, GDV has paid its dividend every month<\/em> as promised. Payout safety was not the issue. The fund declined because the stocks it held dropped in value.<\/p>\n

This is why we buy GDV at market bottoms only<\/em>. When nobody else wants the thing.<\/p>\n

We can think of GDV as the \u201cbreakfast beer\u201d of CEFs. There\u2019s a time and a place. We want to imbibe at market lows and refrain as the tide turns.<\/p>\n

Well, it\u2019s time to hoist that glass again my friend. Cheers to GDV! Just make sure, as always, that we don\u2019t overstay our welcome.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Last week in this column, I said it was time to buy. Today, we\u2019ll clarify that timeline. Buy and hold forever? Nah. Not now. Maybe never again! To everyone that shook their head at this careful contrarian last week, thinking there is too much uncertainty in the world, well, I agree with you. The \u201cthreatdown\u201d […]<\/p>\n","protected":false},"author":1,"featured_media":31926,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[32],"tags":[],"class_list":{"0":"post-31925","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\n4 Steps To 49% Returns By Late 2024 | Innodebt<\/title>\n<meta name=\"description\" content=\"Last week in this column, I said it was time to buy. Today, we\u2019ll clarify that timeline. Buy and hold forever? Nah. Not now. Maybe never again! 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