Nick’s Note: When it comes to picking the right investment strategy, it’s important to know what type of market we’re in. And the market’s “fear gauge”—the CBOE Volatility Index (VIX)—recently spiked from 13 to 21. That’s a 62% increase.
But at PBRG, this volatility presents us with money-making opportunities. In fact, Palm Beach Letter chief analyst Grant Wasylik has developed a stock-picking strategy that’s achieved positive returns even during the market’s worst crashes over the past 20 years.
And today, Grant also shares why now’s the perfect time to take advantage of it…
By Grant Wasylik, chief analyst, The Palm Beach Letter
Most investors don’t know this… But over the last 20 years, a simple stock-picking strategy crushed the S&P 500 by 1,565%.
And unless you have a relationship with a select few boutique investment firms, I can guarantee that no one has told you about it.
Even during the market’s worst crashes over the past 20 years, this approach achieved positive returns.
Best of all, it’s easy to use. You don’t need millions of dollars… access to lightning-fast supercomputers… perfect market timing… or a degree in astrophysics.
A couple of mouse clicks in a regular online brokerage account can have you doubling your money every five years. That’s an average compounded return of over 16% per year—nearly double the S&P 500’s long-term return.
So in today’s essay, I’ll show you how to create your own portfolio of these types of stocks—and even reveal one on my watchlist. I’ll also tell you why now’s the perfect time to use this strategy…
Introducing the “Untouchables”
We call it the “untouchables” strategy. That’s because over the long term, these stocks are so safe and profitable… you’ll never want to touch them.
Here’s how I developed the method…
I started my research by looking at every major bear market over the last 20 years. I combed through thousands of companies for those that soar when the market rises—but only grudgingly give ground when it falls.
I studied every calendar year, too… to find stocks that hadn’t dropped 10% or more in any single year since 2000. In other words, I wanted stocks that fought through each year without going down by double-digit percentages.
You see, small losses aren’t a big deal. If your initial loss is 10%, you’ll need just an 11.1% gain to break even.
But big losses are catastrophic. It’s difficult to recoup them. If your initial loss is 50%, you’ll need a 100% gain to break even.
So unlike other stock-picking methods that can expose you to 30–50% drops during bear markets, this one stays afloat even in the worst sell-offs.
For instance, from its 2000 peak to 2002 valley, the S&P 500 fell 49%—one of the biggest crashes in history. Stalwart stocks like AT&T, McDonald’s, and General Electric plunged 53%, 52%, and 59%, respectively.
The 2008 crash was even worse. From its 2007 peak, the S&P 500 dropped 56.8%. The average blue-chip stock collapsed 53.5%. It seemed there was no place to hide.
Yet even during the worst calendar years for the markets in the last two decades (including those brutal bears), our untouchables strategy crushed it:
It was up 26.4% in 2000 when the S&P 500 was down 9.1%.
It was up 15.6% in 2001 when the S&P 500 was down 11.9%.
It was up 15.1% in 2002 when the S&P 500 was down 22.1%.
It was up 2.2% in 2008 when the S&P 500 was down 37%.
It was up 17.2% in 2018 when the S&P 500 was down 4.4%.
As you can see, holding these types of stocks will help you sleep well at night…
Three Traits of Untouchables
All untouchables have three common traits:
They’ve significantly outrun the broad market.
They haven’t dropped 10% or more in any calendar year since 2000 (as calculated between the prior year’s closing price and the following year’s closing price—dividend included).
They trade with extremely low volatility, so they’re ultra-safe.
Plus, they all pay dividends.
But only a tiny fraction of the 19,000-plus publicly traded stocks in North America pass these criteria. So far, just 14 (0.07%) have made our watchlist.
And as you can see in the charts below, this group crushed the broad market in a safe way (compare the wavy line on the left to the steadfast rising line on the right)…
Over the last 19 years, the S&P 500 had a cumulative return of 143%. Meanwhile, in the same time, our 14 untouchables returned nearly 12 times that—for an average of 1,708%.
Keep in mind, you’d have to hold these stocks over that entire 19-year stretch to realize these returns. And past performance doesn’t guarantee future outsized returns.
But we’re confident these untouchables will continue outperforming the market…
It’s important to know what type of market we’re in to pick the right investment strategy.
And right now, we’re seeing a lot of volatility due to trade war fears and geopolitical uncertainty. Since May 3, the S&P 500 has dipped as much as 4.9%.
So with this current bout of volatility, you’ll want to own untouchables. And consumer staples giant Johnson & Johnson (JNJ) is one on our radar right now.
But remember: Always do your homework before investing in any company. And never invest more than you can lose, even in safe stocks.
Chief Analyst, The Palm Beach Letter
P.S. In February, Teeka and I added three untouchables to our PBL portfolio. They’re up an average of 4% in just three months—without including their dividend yields. If you’re a subscriber, you can read the full issue right here.
And if you’re not a subscriber, just click here to get your risk-free trial subscription. As a bonus, you’ll also learn about four industries we’ve identified that’ll benefit from President Trump’s revenge against his enemies.
Master trader Jeff Clark is revealing the day he believes will mark the end of this bull market in stocks…
Investors caught unaware could be in serious trouble. But it could be a serious payday for a handful of traders.
To get the whole story from Jeff (and learn how you could be one of those who profit), all you have to do is reserve your spot to his free special presentation this Wednesday, May 22, right here…
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