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The Only 4 Buffett Stocks You Need To Retire

Original Link | StreetAuthority by David Goodboy

Warren Buffett is by far the most successful long-term stock investor of all time. His value-centric approach has returned an astounding 1.9 million percent since taking control of Berkshire Hathaway in the mid-1960s.

Although Buffett’s portfolio has recently suffered a little, investors are still handsomely rewarded for following his advice and stock picks. Here are five of Buffett’s holdings that can set you up for an easier retirement.


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1. Synchrony Financial (NYSE: SYF)
This consumer finance company was spun out of GE Financial back in 2015. It currently comprises about 0.30% of Berkshire Hathaway’s stock portfolio. Buffett loves credit card and consumer finance companies — he also owns stakes in American Express (NYSE: AXP) and Mastercard (NYSE: MA). However, I firmly believe the best investment results, going forward, will be gleaned from Synchrony Financial. Here’s why:

Synchrony is the largest issuer of private label credit cards in the United States. This means that retailers like Walmart, Amazon, and Lowes, among many others, utilize Synchrony to manage their credit services. I love the fact that company profits are retailer-agnostic, meaning that regardless of who is winning the retail battle, Synchrony will continue to benefit from transactions.

Options Wealth MachineCompanies like Synchrony profit from the spread between the interest rates it charges and the rate it pays on bank deposits and other capital. Currently, bank deposits represent over 68% of the SYF’s capital source. The difference between the low-interest rates paid on the deposits compared to the extremely high relative rates charged by SYF creates fat profits.

Solid performance has resulted in substantial revenue growth since SYF was formed in 2013. So far in 2017, revenue has grown by 12% to nearly $8 billion. It’s amazing how much can be made from an interest rate spread!

It’s reasonable to think that these trends will continue, as interest rates have increased by 11% in the first six months of 2017. Surprisingly, the stock is trading down nearly 20% this year, meaning you can grab the shares at a great price.

2. Bank of New York Mellon (NYSE: BK)
This old-time bank and money management company has captured Buffett’s interest. He recently ramped up his holdings in the company by over 50%, and his stake now accounts for 1.8% of Berkshire’s portfolio.

BK has outperformed its peers over the last 90 days thanks to increasing loan demand and cost-saving initiatives. Also, President Trump’s progress in repealing the Dodd-Frank Act has helped lift the banking sector as a whole.

What has me the most bullish long-term on this Buffett stock is its expansion into foreign markets. Last year, over 34% of BK’s total revenue came from overseas. The percentage should continue to increase as global markets expand and increase their financial sophistication. Many international markets possess tremendous growth potential which will support the bank’s profits regardless of what happens domestically.

Shares are higher by around 10% this year and the stock yields just under 2%.

3. Apple (Nasdaq: AAPL)

While many analysts are questioning the wisdom of owning Apple right now, Buffett’s commitment to the company is unwavering. The stock is his third-largest holding, taking up nearly 12% of his portfolio. Boasting an incredible $800 billion-plus market cap, the behemoth remains an appealing candidate for a Buffett-inspired retirement stock.

The bullish case for Apple has several key points. First, the company is aggressively improving its products. Second, Apple has allotted $1 billion for original entertainment content creation, a proven moneymaking sector. Finally, it is quickly moving into future technologies like autonomous automobiles, augmented reality and virtual reality, and a variety of services. These three bullish facets will feed growth long into the future.

I also love that the company is moving into emerging markets like India. India is pushing for greater foreign investment and is actively seeking to ramp up its manufacturing infrastructure. Government support, combined with India’s relatively young population, creates the perfect storm for Apple to thrive in the nation. In fiscal 2016, Apple’s Indian sales exploded by 50% over fiscal 2015. I fully expect this growth to continue into the future.

Apple’s success continues, despite the naysayers. In the third quarter 2017, Apple posted revenues of over $45 billion, with 17% earnings growth and a just over 7% revenue increase year-over-year.

Don’t lose faith in this winning Buffett pick.

4. General Motors (NYSE: GM)

Buffett recently ramped up holdings of this leading American auto company by 20%, and it now makes up nearly 1.3% of Berkshire’s portfolio.

The $57 billion-market cap giant’s shares are higher by nearly 23% over the last 52 weeks. Strong fundamental performance backs up the solid stock performance. The company is on track to reach its 2017 goal of making its brands stronger, ramping up retail sales, and increasing product offerings of its four brands. Also, GM has forecasted 2017 earnings to surpass 2016’s $6.12 per share.

A very bullish factor is the auto company’s plan to return its substantial available free cash flow to shareholders while holding onto an investment grade balance sheet and nearly $17 billion in cash to spur growth. The initial repurchase plan of $5 billion was wrapped up in the third quarter of 2016. This year the plan is to return up to $7 billion in share buybacks and dividends.

Just like Apple, GM is rapidly increasing capacity investments in emerging markets. The company has projected more than 50% of global sales growth will arise from emerging markets by 2030. GM has plans to launch 18 new and refreshed vehicles in 2017, and 60 in total by 2020.

The innovation and future growth strategy of GM make it the ideal stock for a long-term retirement portfolio.

Risks To Consider: Past results are not guarantees of future performance. Just because Buffett is heavily invested in a stock does not guarantee it will continue to outperform. Despite his massive success, Buffett has suffered his share of losing stock picks. Always use stops and position size properly when investing.

Action To Take: Consider adding one or more of the above Buffett stocks to your retirement portfolio.


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How Hurricane Irma Foreshadowed the Toys R Us Bankruptcy

Original Link | InvestmentU by Matthew Carr, Emerging Trends Strategist, The Oxford Club

Let’s talk about how powerful e-commerce is…

As Hurricane Irma barreled toward Florida, lots of my friends in the storm’s path went to hardware stores, grocery stores or big-box stores like Target (NYSE: TGT), saw the lines… and walked out.

They had an epiphany (the same one I have every day when I walk into a store and see a long line): They could order what they needed online.

And that’s what they did. They went to Amazon (Nasdaq: AMZN) and had all their emergency supplies delivered.

In this day and age, standing in line – emergency or not – doesn’t make sense to me.

It’s borderline arcane.

So it’s no surprise that the number of retailers planning store closures this year continues to increase. And the latest victim of its own inability to adapt is going bankrupt just in time for the holidays.

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Survival of the Fittest

Nowadays, it’s a daily occurrence to see headlines like “Millennials Are Killing This Industry” or “Millennials Are Destroying These Companies.”

Let’s be brutally honest… These are industries and companies that failed to adapt. They’re now withering away into nothingness because of the failures and shortsightedness of their management.

If they were good companies, they would have recognized their changing customer base.

This is capitalism at work. Survival of the fittest.

I used to work at Blockbuster. And it was one of several video rental stores I had memberships to.

I used to go to Circuit City for my computer equipment and printer needs.

And as a kid, I used to live for going to Toys R Us so I could blow the money I earned doing chores and random jobs on G.I. Joes, Transformers and Teenage Mutant Ninja Turtles action figures.

Blockbuster and its brethren were made obsolete by Netflix (Nasdaq: NFLX), Amazon Prime video, Hulu and a whole host of other services.

Circuit City was replaced by a bevy of competitors, which in turn are essentially being replaced by e-commerce. Even at Best Buy (NYSE: BBY), I feel that most people simply order products from the website after “showrooming.”

And I can’t even name anyone who’s actually gone to a toy store in recent years.

Toys R Us Goes Under

That’s why Toys R Us has joined Gordmans, Gymboree, hhgregg, The Limited, Payless ShoeSource, RadioShack (again), rue21, Wet Seal and more than 300 other retailers in filing for bankruptcy this year.

Already we’ve seen more than a 30% increase in retailer bankruptcy filings in 2017.

And they all made the same mistake – they realized too late how big of an impact e-commerce was going to have on their businesses.

In Toys R Us’ case, just over a decade ago, it was taken private for $7.5 billion in a leveraged buyout by Bain Capital, KKR & Co. (NYSE: KKR) and Vornado Realty Trust (NYSE: VNO).

For a while, things seemed okay.

In 2012, revenue peaked at $13.9 billion. But, like a lot of industries, the company was ultimately unable to fend off Amazon, as well as the likes of Target and Wal-Mart (NYSE: WMT). From 2012 to 2016, Toys R Us sales slipped 15%…

hurricane irma toys r us 1

Back in June, the company reported that same-store sales for its first quarter had declined 6.2%.

Faced with a heavy debt burden and fast-falling revenue, the toy company had few options. It was forced to file for bankruptcy protection earlier this week.

Ironically, this time of year is when retailers generally start seeing their business ramp up. We have the enormously important holiday shopping periods ahead us, from Halloween all the way to New Year’s. It’s a three-month consumer buying spree.

Last year, holiday spending grew a modest 4% to $658.3 billion. But online shopping grew nearly 13% to $122.9 billion.

On top of this, 13.7% of all toys were purchased online. That’s more than double the percentage in 2012, the peak year for Toys R Us. And more than 40% of Toys R Us’ annual sales come during the holiday season.

But more importantly, Amazon’s toy sales increased 24% last year to $4 billion. Brick-and-mortar competitors like Toys R Us simply can’t keep up with that growth rate.

If you’re looking for investment opportunities for the upcoming holiday season, take a lesson from the Hurricane Irma preppers. Don’t waste your time with brick-and-mortars, focus on digital and e-commerce businesses instead. You don’t need any more proof than the more than 300 retailers that have already filed for bankruptcy this year.

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Three Reasons Tesla Could Drop

Original Link | DailyReckoning by RICK PEARSON

The toughest part about making money in the market is getting the timing right. Even when you’re ultimately right about the direction that a stock will move, if the timing is wrong, you’re stuck with a loss.

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Last year, on a single bad earnings announcement, Tesla began a three-day plunge, taking the stock down to around $180. If you were betting against Tesla, you could have made some nice money.

Then Tesla did what Tesla always does — rebound sharply. The stock now sits at $380.

But I am confident that you’re going to see another sharp plunge in Tesla very soon. Here’s why:

1. Management resignations. There’s been a huge wave of this — almost 40 senior executives have resigned in the past few months. This includes very senior people from key areas of the business, including the CFO, the VP of the Autopilot program, the VP of production and the director of battery technology.

These smart people were eager to jump aboard the Tesla ship when it was on the way up. But just as smart, they want to exit early now that Tesla’s peak valuation happens to coincide with significant business problems.

2. Lack of Innovation. The gap between expectations and reality on Tesla’s advancements in its battery is now getting too big for even Tesla bulls to dismiss. The actual performance and characteristics of the battery are significantly below what we were promised.

In addition, Tesla’s lead in this technology over its competitors is rapidly shrinking. Tesla is not nearly the unicorn that it’s made out to be. Don’t get me wrong. Tesla’s batteries are great. But with the stock at $350, they need to be more than great. They need to be uniquely and sustainably better than any of their competitors’. And they aren’t.

3. Cash burn. Yes, this is the same old argument. It is just as bad as, or worse than, it’s always been. Sooner or later it will matter. But again, trying to predict the exact day that the market decides to care is impossible.

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If there is one thing that Tesla knows how to do better than build cars, it’s extract more and more cash from the capital markets. Tesla recently raised a whopping $1.8 billion in a bond sale. As always, Tesla’s timing to do this was impeccable. It occurred at peak market enthusiasm in the bond markets and coincided with lots of Tesla hype around the launch of the Model 3. As a result, Tesla was able to lock in a very low interest rate for itself of just 5.3% per year.

Clearly, this was a great deal for Tesla. But market enthusiasm quickly faded, and those investors who are set to receive just 5.3% per year saw their bonds lose 3% of that value in a single week.

While a few sell-side investment banks continue to tout the share price with higher and higher targets, outside analysts are growing increasingly skeptical. Even the optimistic ones are now starting to suggest that Tesla is at least 20% overvalued at current levels.

Obviously, let’s not forget that these sell-side investment banks touting the stock are the same ones who make millions of dollars when Tesla pays them to run equity and bond offerings.

The Tesla story is growing long in tooth. If we can get better visibility on how soon Tesla might drop, it might be a good time to hedge your bets against the automaker in the market.

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3 Stocks For The New Space Age

Original Link | StreetAuthority by David Goodboy

We are in the early stages of a quiet revolution that has bypassed many investors. It is akin to the original space race of the 1960s and early 1970s, just without the media frenzy. This time, rather than world powers vying for space supremacy, it’s corporations looking to be the first to profit from space industry and travel.

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The public’s excitement regarding space exploration and exploitation is at a shallow level, but opportunities exist for farseeing investors to snap up stocks of emerging space-age companies. The leading investors on Earth are already heavily invested in space technology.

The most notable, and wealthiest, investor in this pace is Jeff Bezos of Amazon (Nasdaq: AMZN). He has committed to investing $1 billion per year into Blue Horizon, a space tourism and payload launch company. Paul Allen, co-founder of Microsoft, has invested in the rights to an upper atmosphere launch vehicle. Tesla founder Elon Musk has an ambitious goal to colonize Mars with his company SpaceX. Finally, Richard Branson has launched a space tourism business called Virgin Galactic.

Many companies in the new space race remain in private hands. However, several public companies are starting to look very appealing to investors looking for early entry into the sector.

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1. Orbital ATK (NYSE: OA)
Orbital is by far my favorite participant in the new space race. The company is a leading aerospace company with a $6 billion-plus market capitalization, and employs over 13,000 people. Its primary products include launch vehicles and related propulsion systems; satellites and associated components and services; composite aerospace structures; tactical missiles, subsystems and defense electronics; and precision weapons, armament systems, and ammunition. We’re not talking about a start-up company here.

While it is existing businesses are quite profitable — the company boasts annual revenues of close to $5 billion and gross margins of over 21% — it’s a unique angle that has me most excited.

Orbital is on its way to being the first mover in the satellite repair business. Imagine being the only player in a repair business where the machines being repaired cost around $300 million to build and launch. The potential here is truly astronomical.

Right now, there are approximately 1500 satellites operating in earth’s orbit and it’s far cheaper to repair them than to launch a replacement. As a frame of reference, a typical satellite generates between $40 and $60 million in cash annually for 15 years. We are talking big bucks and even bigger upside.

The first in-space satellite servicing system is called The Mission Extension Vehicle-1 (MEV-1). The spacecraft wrapped up its critical design review and has 75% of the platform and payload parts delivered to the company’s Virginia location. MEV-1 will start to service its anchor customer, Intelsat S.A., in early 2019. The vehicle has an expected life of 15 years and promises to be a significant profit center.

Satellites bring in around 26% of revenue and rocket systems account for another 35%, making Orbital a strong player in the sector. Revenue is forecasted to grow by 4% in 2017, and earnings are projected to increase by 10% to over $6.15 per share.

Drilling down on recent fundamental performance, the company has a substantial $15 billion-plus backlog of orders thanks to new business activity. In the second quarter 2017, strong revenue and margin growth promise to keep driving the stock price upward. Shares have surged over 23% so far in 2017, setting up an ideal momentum buying opportunity.

2. ViaSat (Nasdaq: VSAT)
If you’ve ever used the internet on a commercial aircraft, you may have used ViaSat’s services. ViaSat operates in three segments: satellite services, commercial networks, and government services. Through four satellites, the company provides high-speed interest to in-flight and terrestrial customers.

While this broadband company is trading lower by over 8% this year, fundamental figures are still strong. In its fiscal first quarter 2018, the company posted a record $154 million in operating cash flow and a $1 billion-plus order backlog.

Research & Development, SSL liability payments, and the ViaSat-2 (the next iteration of the company’s satellite design) ramp-up negatively impacted the adjusted EBITDA numbers year-over-year, but when these issues are removed EBITDA shows a robust 9% growth over the same time frame. The company is in the process of transitioning to next generation service plans and currently has 568 commercial aircraft set up for internet service with 840 under contract.

There are two factors that have me bullish on this company. First, government contract awards surged 88% in the fiscal first quarter with a nearly 50% increase in order backlogs. Secondly, payments on the first-gen ViaSat-1 are coming in, and government contracts for cybersecurity and tactical data links can only increase in our volatile geopolitical world.

I like the fact that the company is not a one-trick pony like our next, even more risky pick.

​3. Gogo (Nasdaq: GOGO)
A pure-play satellite broadband provider for Aircraft, Gogo is shaping up to be a great long-term hold. The company is a global leader in inflight satellite connectivity for both commercial and private aviation. However, its shares have fallen on hard times recently.

Gogo is cash flow-negative, but things are rapidly improving. In the second quarter, the company saw record revenue of over $170 million and set guidance forecasts of 450 to 550 aircraft installations in 2017. Growth has resulted in net losses, but that is a very temporary headwind as the expenses will lead to profits over time.

Gogo’s new Alaska Airline contract and improving global economic conditions are signs of the company’s bright future.

Risks To Consider: I have listed the above companies in order of risk. At their cores, these are technology businesses in the new space race. Technology firms are subject to competition and innovation making them irrelevant. It is the nature of the beast. Always use stops and position size properly when investing.

Action To Take: Consider allocating a portion of your portfolio to one or more of my favorite new space-related stocks.

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Insurers LOVE When You Make This Critical Mistake

Original Link | DailyReckoning by ZACH SCHEIDT

There’re Two Very Different Types of Life Insurance

The concept behind life insurance is pretty simple: You pay an insurance company a monthly premium for a specified number of years. And if you pass away during this time, the insurance company pays a lump sum to your loved ones.

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This type of “term” policy is extremely valuable for people like me — with a young family that counts on me to earn the money to cover day-to-day expenses. And for most individuals, this type of policy is fairly inexpensive. For about the same cost as my monthly water bill, my family can receive a couple million dollars to help with if expenses if I’m not around to take care of them.

Perhaps you are in a similar situation with loved ones that count on you for income or to provide care for kids or other family members.

Unfortunately, while the basic concept behind life insurance is easy to understand, the life insurance industry has added nuances to these products that can make buying life insurance much more complicated.

A different type of life insurance that agents are aggressively selling is often referred to as “whole” life insurance. Incidentally, this is the type of insurance that my friend Jon was trying to sell me.

At its core, “whole” life insurance is similar to the “term” policy that I just showed you.

Except whole life insurance has a couple of added features. Features that you certainly pay for…

For one thing, whole life insurance policies typically have no expiration date. So if you buy a whole life insurance policy, it doesn’t matter if you die early, or if you die at a ripe old age. Either way, the policy will pay a sum of money to your beneficiaries.

Second, most whole life insurance plans have a “cash value” component.

The way this works, is that you pay extra to the insurance company and they accumulate that extra cash as part of your ultimate payout. Over time, that cash value is guaranteed to grow at a specific rate. And for some policies, the cash value can be used to pay for future monthly premiums.

Here’s a quick table I came across recently that explains the differences between term and whole life insurance.

chart: policy differences

No Such Thing as a Free Lunch

Options Wealth MachineWhile both of the whole life insurance features actually sound appealing (who wouldn’t want an insurance contract that never expires — or a cash value that continually increases), the real trick is in how much an insurance company charges for these added features.

I grew up in a big family, and my mom always told us kids “there’s no such thing as a free lunch.”

Usually, that meant it was time to do the dishes or some other chore. But what my mom was really trying to teach us is that there is always a catch when it appears you’re getting an extra benefit.


“So I bought one of those stocks,” he told me, laughing slightly. “And it hasn’t done so well.”

My first question – as it always is in these situations – was “Did you use a trailing stop?”

He shook his head. “I was supposed to hold the company for the next five years, so I didn’t think it was necessary.”

Now, I’ll pause here to say this: I am a product of the new millennium.

My investing life began during the dot-com crash, only to be followed a few years later by the financial crisis.

I know nothing but boom-and-bust cycles. And, as a result, I don’t fear volatility. Nor do I fear collapses or sell-offs.

A rally can’t exist without a sell-off or correction, and vice versa.

Sell-offs are my friends. They allow me to scoop up companies I’ve been eyeing at discount prices.

And rallies, when they come, are always welcome. But I always view them with suspicion – because I never know how long our relationship will last.

The goal is to get in, protect your profits, get out and move on.

Now back to my conversation…

The man told me the name of the stock he purchased: Enerplus Corporation (NYSE: ERF).

He asked, “What should I do now?”

I pulled out my phone and pulled up charts for the company. Here’s what I saw…

trailing stops 1

Not a pretty picture, is it? The only answer I could give was “I can’t tell you what you should do. BUT, in the future, you should absolutely use a trailing stop.”

I don’t know how much this gentleman invested in this company. But let’s say $10,000 to demonstrate my point. Let’s also assume he bought the stock at open on April 15, 2014.

The company pays dividends, but I’m not going to include them because of their small sizes.

So $10,000 in Enerplus would have given him 475.74 shares at $21.02.

Today, Enerplus is trading at $8.99. So his original $10,000 investment is worth $4,276.90. (That’s actually good news as shares are up from the sub-$2 range they were trading for earlier this year… Hooray!)

That’s a loss of 57.23%. Ouch.

Now let’s say instead of holding this position, he implemented a 25% end-of-day trailing stop (what we use at The Oxford Club). At the original purchase price of $21.02, his initial trailing stop would’ve been $15.77.

But as shares move higher, so does the stop. Enerplus did have a solid run, hitting a closing high of $25.23 on July 2, 2014. So his 25% trailing stop would have moved higher to $18.92.

The stop would have been triggered on September 19, 2014. Selling at the next open for $19.08, he would have had a loss of just 9.23%.

Altogether, his original $10,000 investment would have been worth $9,077. A loss, but only a single-digit loss.

I’m sure you’d agree it’s far better than the -57.23% return he’s currently sitting on.

Using a stop loss would have also kept him from worrying for two years straight, the pressure steadily mounting.

I don’t want you to think I’m picking on this gentleman. In all honesty, I completely understand why he didn’t sell. Fact is, we are all less likely to hit the sell button on a loss than a gain.

That’s precisely why it’s so important to use stops. They completely remove emotion from the equation.

And who knows? Maybe over the next two years, Enerplus will gain 134%. (That’s what he’ll need to get back to his original buy price.)

It always amazes me that trailing stops are seen as a controversial strategy. At conferences, I always hear, “But what if it bounces higher after I’m bucked out of the stock? I’ll have missed out on that!”

That’s true. But it’s not the point.

The point is… What if your shares go even lower?

Trailing stops make sure you never find yourself in that position. That you never have to ask, “What should I do now?”

Whole life insurance policies are sold by insurance companies, because they make so much sense… for the insurance companies!

You see, when you pay extra for a whole life insurance policy, the insurance company takes the extra money and it invests that cash. Over time, the value of this extra cash grows and grows. And some of that cash goes to you as the policyholder.

But the reason whole life insurance companies push these whole life insurance policies so aggressively is because they are so profitable.

These insurance companies employ armies of statisticians who crunch the numbers on everything from how long you’re likely to live, to how much money they can make on your money before they have to pay you.

And the end result is that insurance companies make much more by charging you extra for whole life insurance, than they will ultimately pay your heirs when you pass away.

So instead of being a great investment that helps you pass wealth on to your loved ones, whole life insurance policies are usually just high-cost product that slowly erodes the wealth you could have been growing…

A Better Way to Prepare for the Future

Now I don’t want to discourage you from buying life insurance for your loved ones. Especially if you’re still in a life period where people are counting on you to provide for them.

But I’d rather see you protect your family AND build your wealth at the same time.

That’s why I strongly encourage you to politely say “no thanks” when your insurance agent or financial planner tries to sell you whole life insurance, and take a more effective strategy.

Instead of paying extra for a whole life insurance policy, buy a term policy that covers the amount of time that people will be relying on you for needed income. In my case, that’s about another 15 years until my youngest moves out of the house.

Once you’ve purchased your cheaper term life insurance policy, take the extra money that you would have spent on a whole life policy, and start investing in solid dividend-paying stocks. The kind of stocks that I feature regularly in my Lifetime Income Report  service.

You’ll find that over time, the wealth you accumulate from saving money on your life insurance premiums — and investing those savings for yourself instead of letting the insurance company invest for its own gain — will go much farther in growing your wealth.

And best of all, you can decide exactly when and how to pass that wealth on to your loved ones. Instead of waiting for a life insurance policy to pay out when you’re no longer around.

So please do yourself and your heirs a favor. Avoid the whole life insurance scam and take charge of your own investments. You’ll be much better off and grow your wealth much more quickly that way.

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7 High-Yield Stocks To Own For The Rest Of Your Life

Original Link | StreetAuthority

Back in 2014 offshore drilling giant Seadrill (NYSE: SDRL) was a darling for high-yield stock investors. At the time, Seadrill was the largest offshore driller in the world by market cap. Revenue was surging, hitting a fresh all-time high early in the year.

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Most importantly for high-yield stock investors, Seadrill was paying one of the best dividends in the entire global stock market. Between 2010 and 2014 Seadrill’s dividend yield ranged between 7.0% and 10.8% — topping off above 11.0% in early January. Take a look below.

Despite the impressive run of revenue growth and dividend payments, by the end of 2014 Seadrill investors were begging for mercy. When the price of oil crashed in the summer of 2014, it took Seadrill’s revenue and dividend payment with it. By the end of 2014 the company had scrapped its dividend payment entirely.

Two days ago, Seadrill — once the largest offshore driller in the world — filed for bankruptcy, virtually wiping out all of its remaining stock and bond holders. It was a stunning turn of events for a once great company, and an important lesson for high-yield stock investors.

Not All High-Yield Stocks Are Created Equal

Some of the highest-yield stocks can also be the riskiest. For example, a high dividend yield can actually be a sign of distress if shares have fallen sharply. Other high-yield stocks may be benefiting from short-term industry tailwinds that are unsustainable in the long run.

For long-term income investors, having the wrong stocks in your portfolio can be costly. That’s why I am going to reveal seven of the most reliable, high-yield stocks in the S&P 500.

Not only have all seven high-yield stock on this list been paying a dividend for 25 years, they have also been raising their dividend 25 consecutive years. That makes these some of the most reliable high-yield stocks in the entire global stock market.

Take a look below.

Company Ticker Current Yield
AT&T Corp. T 5.4%
Target TGT 4.2%
IBM IBM 4.1%
Realty Income O 4.3%
People’s United Financial PBCT 4.1%
Tanger Factory Outlet SKT 5.6%
Mercury General MCY 4.4%

From this group I have chosen to highlight AT&T and Realty Income because of their outsized yields and impressive dividend histories.

AT&T (NYSE: T) is one of the largest and most successful telecom companies in the world.

That success has helped AT&T evolve into one of the best high-yield stocks in the S&P 500. T’s 5.4% dividend yield is a 175% premium to the S&P 500’s 2.0% yield. Not only does AT&T offer an outsized yield, but it’s also one of the most reliable. AT&T has increased its dividend for 31 consecutive years starting all the way back in 1986.

Looking forward, I am expecting more of the same from this global leader. AT&T benefits from multiple sustainable competitive advantages. The company’s primary advantage is that it operates in a highly regulated industry that makes it virtually impossible for new competition to enter the market.

Realty Income (NYSE: O) is one of the largest commercial property owners and managers in the United States. It owns and manages over 5,000 commercial properties across the country, including Puerto Rico. This industry leadership has turned Realty Income into a dividend powerhouse.

The company’s dividend yield of 4.3% is a 115% premium to the S&P 500’s 2% yield. Just like AT&T, that high yield also happens to be extremely reliable. The company has made 565 consecutive dividend payments in its 48-year history and has raised its dividend 93 times since being listed on the New York Stock Exchange in 1994.

Risks To Consider: The U.S. economy is evolving faster than ever. In 1965 the average age of an S&P 500 company was 33 years. In 1990 it was 20 and in 2026 it is predicted to fall to just 14. Although I expect all of the companies in my list to continue paying outsized dividends for many years, I recommend an annual evaluation to confirm the long-term trend.

Action To Take: High-yield stocks can be deceptive. Some of the highest yields can also be the most unreliable. Just look at Seadrill, with its cancelled dividend in late 2014 and recent bankruptcy filing. High-yield investors looking for the best and most reliable yields should start with my list of seven high-yield stocks, particularly AT&T and Income Realty. These stocks have passed the test of time and look set to continue paying outsized dividends for many years.

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Turn a tiny small-cap bump into a 15 percent gain

Original Link | StreetAuthority

Over the past 90 years, September and October have earned a reputation for being the two most volatile months for the markets. And this September is likely to be anything but predictable.

The month is already off to a rocky start. In the first few days of September, North Korea tested a nuclear-tipped missile, leading U.S. officials to warn the country is “begging for war.” As I write this, Hurricane Irma has left a trail of destruction Florida and is moving on to drench the eastern United States.

Needless to say, it’s been tough to pin down a high-probability trade lately.

That’s why it helps to go back to the well, so to speak, and revisit a previous winning trade. After all, thanks to my stock market “raiding” technique, where my Profit Amplifier readers and I extract more than our fair share of profits from trades, we can repeat winning trades again and again.

For those who are unfamiliar, when I say “raiding the stock market,” you may think I’m playing with words. But I really do mean raiding the stock market. This is a technique Wall Street has been employing for years.

And it’s all thanks to the power of options.

Small Cap Stocks Are Looking Weak

As I scoured through potential trades, a recent winner came to the forefront — the Russell 2000 Index ETF (NYSE: IWM). We’ve closed two successful trades from small moves in this ETF in the last few months — one in June that gained 9.1% and a second in August that gained 38.9%.

Why not do it again?

Since its 7% fall this summer — from July highs above $144 to a low of nearly $134 — the index has been on a rip-snorting rally, gaining back 4% in just a couple of weeks. While I’m chalking this one up to a technical breakout/short covering rally, there was also a few economic releases that may have helped.

The problem is that little of this news, including Trump’s expected tax plan, are directly aimed at benefiting U.S. small businesses.

What I found most odd was that this rally came during a time when a hurricane was ripping through Texas, halting thousands of businesses and creating hardship for tens of thousands of Americans. At the same time, the Bureau of Labor Statistics’ (BLS) monthly employment number missed analysts’ expectations. None of this struck me as “net positive” for small biz.

Now, I know there was a relatively strong GDP report for the second quarter (that could still be revised lower), but other economic data remains mixed, and the market is stretched. GDP is also a highly volatile and complex computation that can lag real-time economic performance.

But despite the Q2 GDP numbers, the most important leading data on stock health is still earnings, and as I pointed out in my last alert, earnings for the Russell 2000 were poor.

Poor earnings are NOT catalysts for new highs, especially when sales were down more than 6% in the index!

After careful consideration, I’ve come to the conclusion that the recent rally in the IWM is a perfect entry for a fresh put option trade.

Technicals To Guide Us 

The Russell 2000 is known for its volatility, which has only increased with electronic trading, high-frequency trading and other trading algorithms.

The index has rallied 10 of 11 trading days and eclipsed both its 200- and 50-day moving averages, which have helped propel the index higher.

At recent levels near $139.55, the index is priced only a few dollars above its 200-day moving average ($137). Because this average tends to hold the most weight when it comes to support, my Profit Amplifier readers and I used it as our target for trade.

While I believe IWM can easily drop down to support at $136.22 and beyond, a 1.8% fall back to its 200-day moving average would still give us a healthy 15.4% gain by November — when the put option expires.

I can’t give away the exact details of the trade, but suffice it to say, a 15.4% gain for a 1.8% move is plenty for my risk tolerance — especially with so much chaos in the news lately.

Bottom line, using options to raid the stock market is the best way to increase your returns while preserving capital and reducing risk.

Of course, that’s only if it’s done correctly.

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Game-Changing Retirement Fortune
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