Dear Mr. Market:
We don’t make it a regular practice to be ambulance chasers every time there is a tragedy or natural disaster. That being said, almost every major event (whether it’s considered good or bad) can create an opportunity for your investment portfolio.
Conversely, the old adage of “less is more”, could certainly apply here. We’re not simpletons just for the sake of it but in general the ‘less is more’ approach can greatly benefit your finances. Think about it…and if you haven’t already, we’ll spell out several major ways that having less of something will benefit your wallet:
Trading: Trade less and you will typically save more in transactions costs, tax issues, and emotional mistakes. Here’s another favorite saying to remember: “Trading stocks is like a bar of soap….the more you handle them the smaller they get!”
Media noise: Listen to the media less and you might actually use your own noggin more, therefore less inclined to believe something false or misleading just on the premise that is was reported. This is not necessarily a “fake news” rant but rather a reminder that making decisions that are not driven by strategy or discipline, ends up in you losing control of your independent thought process.
Fees: This one is basic but often ignored…The more fees you pay, the harder your investments have to work just to earn the same performance as an equally comparable investment does. We love the two horse analogy; if two horses are racing each other but one jockey has eaten too many doughnuts (higher fees) than the other…which horse wins?
Conflicts of Interest: The less you have of these the better decisions your financial advisor will make on YOUR behalf. Work with a fiduciary (like a Registered Investment Advisor) that has your interest at heart and not his/her commission schedule as their driving compass.
Emotions: We’re not asking you to be a zombie but when was the last time you saw a job posting for a portfolio manager who had the following qualities: Volatile temperament, greedy tendencies, fearful of misperceived dangers, stubborn to a fault, and lack of self control? The more you let your emotions drive your finances the less of them (moolah) you’ll have!
So now that you have been reminded that in finance, “less is more”…how might that apply to Hurricane Florence and your portfolio? Well….you could certainly go short (i.e. bet against) certain stocks in sectors that may get hit, such as insurance companies. While these companies prepare for such events and can absorb the near-term shocks, they would obviously do better if disaster was avoided, right?
Another way of “less is more” is to simply ignore this event. The majority of headline driven events, especially highly telegraphed ones, are often overblown. Most novice investors rack their brains trying to think of how to profit in advance of something major and one of two things usually happen: (1) The resulting effects are already ‘baked into the cake’ and they barely capture anything from making a move, or (2) Nothing you expected.
Oh wait…we promised you the “Top 3 Stocks” to buy in advance of Hurricane Florence landing, right? OK…that was just another typical eye candy headline that we’ve hopefully trained our more seasoned readers to digest with caution. The way we look at this event is maybe it’s a chance to nibble at a few companies that we either already like and had on our radar or possibly might do even better than expected due to post hurricane events.
Home Depot (HD) – One could argue that Lowe’s is a better value right now but we believe the leader of the pack will continue to be the best bet. Home Depot has enjoyed a tremendous rally as of late hitting an all-time high and from a technical standpoint it looks like it could run up some more. Hurricane momentum aside, we believe that with the way the real estate market is trending there may be more people interested in fixing up their current homes as opposed to trying to move and HD will benefit from that. Home Depot closed at $211.98 today.
Ryder System (R) – Hurricane Florence will likely boost prices with higher demand but we like the stock based on it’s valuation and it being oversold. Ryder closed at $78.73 today and we believe this stock could easily be at $90 over the next 12 months. R is cheap, trading at just over 5 times earnings (P/E of 5.37) and in our opinion ready to break out to much higher levels. The stock also kicks off a nice dividend yield of 2.37% which we’re guessing is beating what your cash at the bank pays you…
Dominion Energy (D) – Most power companies will have to deal with outages and some of the negative outcomes associated with that so this may not appear as an obvious candidate to benefit from a hurricane. Our main premise on this particular stock, however, is actually that it’s been oversold for a while now and poised to recover. D is down -10.85% YTD and closed at $71.57. We believe it has potential to hit $80 within 12 months and while you wait you can enjoy a healthy dividend yield of 4.62%!
Thanks for reading and please feel free to share with anyone you know that may be interested. In the meantime, let’s pray for everyone’s safety and well being as Hurricane Florence makes its way towards the eastern seaboard.