Something Is ALWAYS On Sale On Wall Street

Posted On October 31, 2016 10:23 pm

The S&P 500 has had one heck of a bull run over the last 7.5 years, up 259.3% since bottoming on March 3, 2009. So not surprisingly the market’s PE ratio of 24.5, 67.3% above its median historical norm of 14.6, has a lot of people calling a market top and advising selling stocks and moving to cash.

While this certainly sounds like a nice idea in theory, the simple fact is that market timing, (as a future article will explain), simply doesn’t work for the vast majority of investors. So rather than throw up your hands and let slowly accelerating inflation eat away at your money’s buying power, here’s a surprising, simple, but true fact that can help you become an investing legend.

On Wall Street, no matter how crazy expensive the market may be, SOMETHING is always on sale.

Today’s obvious example is oil stocks, which have been hammered by the worst oil crash in over 50 years. But energy is far from the only hated industry. Biotech companies, including some great dividend growth names such as Gilead Sciences, (GILD), Teva Pharmaceuticals (TEVA), AbbVie (ABBV), and Amgen (AMGN) have all been hammered hard in the past year, partially due to overblown concerns about whether or not Hillary Clinton is going to impose price controls on the industry.

In reality, her proposals, A aren’t likely to pass a gridlocked Congress, B, don’t target the majority of the these companies’ cash cows, and C. the biotech industry has adapted to a plethora of mandatory price discounts on drugs sold to Medicaid patients, hospitals in underserved communities, and Medicare patients who fall into the “donut hole”. These mandatory discounts, ie price caps, can be as much as 50%.

So in other words, Hillary winning the White House? Nothing the biotechs can’t handle. Meanwhile:

Johnson & Johnson (JNJ): down 7.4% in the last 3 months
Gilead: down 7.5%
Abbott Labs: 12.3%
AbbVie: 12.3%
Shire PLC (SHPG): 13.1%
Pfizer (PFE) : 13.6%
Novartis (NVS): 14.7%
Amgen: 17.9%

Not into biotech/pharma? How about the badly bloodied and bludgeoned REIT sector?

Or what about quality industrial suppliers like W.W. Grainger (GWW): down 11.9% in the last 6 months?

Or how about telecom giant AT&T: down 11.2% since late September and now yielding 5.3%?

Or what about Disney: down 23% since its Dec 2015 highs.

Or Nike, down 25.2% since December 2015.

The point is that there is always some high-quality dividend growth stock the market is down on, and that is where you can deploy your capital to get the best value, the lowest price, and most importantly of all, the highest yield on invested capital.

About author

Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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