Courage and Patience Will Profit
How to safeguard your investments from the bear to ride the next bull
In the 1983 comedy hit “Splash,” the not-so-evil government scientist played by Eugene Levy several times delivers the line “what a week I’m having.”
If you’re invested in stocks now, chances are you’ve thought the same thing more than a few times already this year.
First the bad news:
That thought is likely to cross your mind at least a few more times before this tsunami of selling momentum washes out. That’s because—with hindsight—global government and monetary authorities have greatly underestimated building inflation pressures. And now they’re jacking up interest rates at an unprecedented pace to make up for lost time—which basically means the economy is likely headed for a recession later this year.
Now the good news:
The stock market of the past few years has been increasingly dominated by ETFs, passive funds and robo-accounts—and it’s the money coming out of them that’s driving everything lower—with really no regard for what’s actually being sold. And that means a huge opportunity for investors with the courage, wisdom and patience to buy individual stocks of high quality companies that as businesses can and will weather the economic challenges ahead—while paying the most generous dividends we’ve seen in this market in quite a while.
I’m talking about stocks of best in class utilities and other essential services companies—the stock in trade, if you will, of the advisory I’ve guided and published for nearly a decade, Conrad’s Utility Investor. CUI combines my research and analysis of the past 35 years to bring to readers the best of this safest of sectors—with three model portfolios targeted to individual investment goals and objectives, and a coverage universe of close to 190 companies.
I provide clear buy/hold/sell advice for every company I track, Quality Grades that measure risk to help readers pick the best stocks for them, and in-depth analysis of underlying businesses—so we’ll know who’s getting stronger, as well as when companies weaken and we need to sell.
Earlier this year, my “Trading Above Target” list and the accompanying strategy I’ve developed enabled readers to take profits on positions in half a dozen stocks my system identified as trading at unsustainably high prices—despite being very solid companies. The selloff of the past month has firmly closed the window of opportunity on such profit taking. And the stocks I pointed out then are now down anywhere from 25 to 35 percent.
But there is another window that is starting to open—that’s to buy many of those same very high quality companies at their lowest prices since the spring 2020 selloff that followed the early pandemic. I call those “Dream Buy” prices. And it’s the second piece of my Conrad’s Utility Investor strategy for dealing with the extreme market volatility that’s become the rule for investing the past several years.
The gist is we want to buy top quality stocks when prices are at their lowest—which is always when investors are throwing in the towel after a severe and prolonged selloff. History shows again and again that so long as companies stay strong on the inside, as businesses, their stocks will recover. If you can buy them low enough—at a Dream Price--you’ll lock in windfall gains—and if you look at our CUI issue archives on our website, you’ll see that’s in fact what we did in several dozen Portfolio stocks coming out of the 2020 market meltdown.
What made us confident then that our favorites would recover—and why I’m equally confident in a repeat now—is the unmatched resilience of the utilities and essential services companies I’ve tracked now for more than 35 years. Simply, the world can’t get by without essential services like electricity, water and communications, no matter what’s happening in economics or politics. And that means well managed companies in this sector always enjoy reliable revenue other industries can only envy. That means strong recession resilience. And as my most recent earnings analysis of the nearly 190 companies in my coverage universe also demonstrates, utilities are resistant to inflation pressures as well.
This is also the only sector where every single one of the literally thousands of mergers over the past century and a half has created a stronger, more dynamic company. And utilities have even done well in times of rising interest rates like we’re going through now: For two years starting in mid-2004, for example, the Federal Reserve jacked up the Fed Funds rate from less than 1 percent to 5.25 percent—and the Dow Jones Utility Average rose by more than 60 percent, one of its best two-year showings ever.
I’ll admit, these are scary times to be an investor. Stocks and bonds are in freefall. Even commodities like oil—which have been red-hot so far in 2022—have skidded in the face of rising worries about a recession. And the bears are out in force in the popular investment media, warning of far worse to come.
At such times, the most important advice I can give is to be courageous and patient, and to focus on seeking good information to help you make wise decisions. If you can make that commitment, you’ll convert the volatility and downside we’re seeing now into a major opportunity to build wealth for yourself and your heirs.
So with that in mind, I’d like to invite you to check us out at Conrad’s Utility Investor.
Please click on the link below to find out more.
https://conradsutilityinvestor.com/