It’s a New Record
The summer is almost over. But what a splendid summer it’s been, for the stock market anyway. The market just hit a new all time high and nine of the portfolio positions are at or near the 52-week high or the all-time high.
After a brief decline in early June, the market has resumed the uptrend that began on March 24th. It has been a spectacular 55% rally in less than five months. With yesterday’s new all time closing high on the S&P 500, the length of the bear market is confirmed. At 33 days, it was the shortest bear market in history. Hopefully, it will be mirrored by one of the shortest recessions in history.
It seems odd with the virus still around and the economy nowhere near the shape it was in before the pandemic. But the market is forward looking. It sees a strong recovery in the quarters and years ahead combined with record low interest rates and an accommodative Fed.
The market may have gotten ahead of itself. And there are still risks out there. There could be a second wave of the virus. As well, there is uncertainty regarding the election and the possibility of a disputed outcome. But the market seems confident that a vaccine is on the way. In the absence of a major disruption, the market appears unlikely to experience a meaningful decline.
The news is good. Enjoy it. And enjoy the rest of your summer.
High Yield Tier
B&G Foods (BGS – yield 6.5%) – Earnings were spectacular. Business is booming and will likely remain and a more permanently higher level after the pandemic. The stock is still in an uptrend with good momentum. And fundamentally, the stock still isn’t overvalued. BUY
Brookfield Infrastructure Partners (BIP – yield 4.5%) – Even in a pandemic the reliable income generating assets enable Brookfield to grow earnings. On the other side of the pandemic there should be a better environment for the infrastructure company than existed before. Strapped governments will need to raise cash by selling assets and the Brookfield will seek out the best opportunities, at great prices. BUY
Enterprise Product Partners (EPD – yield 9.4%) – This energy infrastructure stock has great fundamentals and lousy technical performance. The operational performance of the company has been stellar through the crisis and should continue to be impressive as the recovery gains traction. But the stock can’t get out of its own way. The stock performance should reflect the fundamentals at some point. In the meantime, that huge yield is safe. HOLD
STAG Industrial (STAG – 4.5%) – Industrial REITs are a good business. Warehouses and distribution centers are not fussy properties that require a lot of maintenance. They house manufacturers and merchandise and the rent is steady. The properties are in high demand as online shopping needs increasing warehouse space. STAG has returned 44% over the last three months and just made a new all time high. HOLD
Verizon Communications (VZ – 4.4%) – After some lackluster mid-rally performance the stock has been moving higher since late June and is now within a few dollars of the 52-week high. It’s a solid performer during the pandemic and has a growth catalyst ahead in 5G. BUY
Dividend Growth Tier
AbbVie (ABBV – 4.9%) – The strong uptrend in this stock stopped around the middle of July. It has pulled back a bit (currently 96 from a high of 100), but it feels more like the stock is taking a breather after a steep move higher. Everything is still good with this pharmaceutical company. Operational performance has been solid, stock returns have been good and ABBV still sells at a reasonable valuation. With ABBV you can play both defense and offense as it is resilient in any economy and has a solid growth catalyst for this year and beyond. BUY
Altria (MO – 8.1%) – The cigarette maker has become a top value stock. The trouble with its new acquisitions JUUL and Cronos (CRON) are already priced into the stock. It now pays a massive dividend yield that it easily covered by free cash flow. And the stock is actually waking up a little bit. MO has been in an uptrend since late June, albeit a slow one. As this market forges ever higher ahead of virus and election uncertainty, this low priced and high yielding stock is something you can feel comfortable owning. BUY
Crown Castle International (CCI – yield 2.9%) – This cell tower REIT was on a tear and made a new all time high in June. But it’s been going sideways ever since. The market was quick to recognize that with its reliable and growing cell tower business it was a good pick up in the bear market. It paused a bit while the rest of the market caught up. From here, it is still a solid hold with a growing business that will continue to thrive regardless of the course of the virus or the election. HOLD
Eli Lilly and Company (LLY - yield 2.0%) – The drug company has a fantastic line up of recently launched drugs that should propel earnings higher for several years. Some other drug companies make that claim but Lilly has a strong history of actually executing. A best-in-class pharmaceutical company with the tailwind of a rapidly aging population should be a great place to be. The stock has pulled back from the high in July but the uptrend is still in place. BUY
Innovative Industrial Properties (IIPR – yield 4.7%) – The marijuana farm REIT is knocking it out of the park. IIPR is up over 63% in the last three months and 30% in the last month. Strong earnings probably gave it a push as earnings grew 263%. This is a REIT with an incredible niche and it is growing like crazy. It can get whipped around with the market in the near term but fundamentals justify a higher price. HOLD
Qualcomm Inc. (QCOM – yield 2.3%) – The chip maker had been a market performer through the pandemic, but it broke out a few weeks ago. The company announced better than expected earnings and a highly impactful settlement with Hauwei. The stock soared to new highs in the days after the announcement. The stock was attractive ahead of the 5G rollout, as it should get a big profit boost. Now it looks like that bountiful future will be here sooner than expected. HOLD
Valero Energy Corp. (VLO yield 7.0%) – This beleaguered stock will come back. It has to if the economy recovers. And the economy will recover. Conditions have already vastly improved since the trough of the crisis. But the stock stopped rising as it became clear that it will take another quarter to go through the accumulated inventories of refined product. But the stock should have a strong run higher in the quarters ahead. HOLD
Safe Income Tier
Alexandria Real Estate Equities (ARE – yield 2.4%) – This life science and research lab niche REIT is still loving life. It is still on a relentless uptrend since March and near the all time high. The defensive nature of the business in the growingly popular medical research space is desirable to investors in this pandemic and beyond. HOLD
Invesco BulletShares 2021 Corporate Bond ETF (BSCL – yield 2.6%) – This short term bond ETF has held up well through the crisis because it isn’t in the stock market, the bonds are short term, and they are investment grade rated. It still has a yield that’s better than you’ll get in most traditional safe haven investments. BSCL is a safe port in a stormy market and owning it provides much needed comfort as risk and uncertainty abound. BUY
Invesco Preferred ETF (PGX – yield 5.5%) – This preferred stock ETF holds up like a rock in all but the most tumultuous market selloffs. And even then it goes down much less than the market. At the same time, it provides a serious yield from an asset class that is diversified from the stock and bond markets. HOLD
NextEra Energy (NEE – yield 2.0%) – The Utility sector has been a poor performer through this pandemic. But you would never know owning NEE. It has returned over 18% YTD and blown away the market. It looks like the stock is consolidating somewhat around the all time high. NEE should continue to be a great stock to own though the rest of this crisis as well as beyond. HOLD
Xcel Energy (XEL – yield 2.5%) – This smaller and lesser known alternative energy utility is also beating the market this year, as well as over the long term. Alternative or clean energy isn’t going away. It will continue to grow in prominence and perhaps at a faster rate in the future. It also continues to become cheaper to produce and deliver all the time. The stock has moved off the all time high but is still in an uptrend. HOLD
