Not sure about buying and holding stocks right now?
Me neither. The market is pricey. Meanwhile, the potential downside looks dicey. Mr. and Ms. Market seem fixated on rate cuts this year from the Federal Reserve. If we don’t get them, look out!
We may not see rate cuts in 2024 if inflation continues. And right now, crude oil prices are popping. Consumer prices are unlikely to cool while oil is high.
But, on the other hand, the Fed is engaging in quiet QE. Gold has sniffed it out and rallied. Bitcoin, too, is going bonkers.
Cash is destined for the trash bin if the market continues to defy gravity and levitate higher. We cautious contrarians seem stuck between a rock and a hard place. To buy or not to buy? So here’s an alternative thought.
How about we buy bargain dividend payers—with the plan to sell them before things turn south?
In other words, we’ll be in the market, but not married to any positions. Because, in this financial environment, payout promiscuity is the way to go.
No offense to any traditional investing philosophies. But why are we going to buy and hold the cash cow when we can get the yield milk for free?
I’m talking about buying and selling the same dividend stocks we always discuss here. The twist is that we are buying low, selling high—quickly!
Then we rinse and repeat.
Dividends are a dime a dozen; good ones at the right time are not. With an uncertain outlook we needn’t “stick it out” with any of them, for better or for worse.
When the going is good, we buy and hold for a bit.
Then, as their future clouds, we dump them for better-looking payers!
For example, let’s talk about Laboratory Corporation of America (LH). A 1.4% yield usually isn’t enough for ink in these pages. But we’re discussing the company affectionately known as “LabCorp” to us patrons for two reasons:
- I went to LabCorp for my routine bloodwork yesterday.
- Which reminds me that we income investors can earn 68% returns per year from LH—without trading options—simply by timing our buys and sells right.
So, we’re buying LH.
Just kidding about the reasoning, of course. The trading opportunity is real. I was at my local LabCorp at 7:30am yesterday. (Early but when fasting is required, why be awake sans coffee any longer than needed?)
Last October, I recommended LH to my Dividend Swing Trader readers. We sold it high in December for 11.9% returns (or 68% annualized gains!).
That was a good time to step aside. LH, of course, was not going to actually return 68% in a given year. This is a blue-chip medical stock. It is always heading higher, but in fits and starts. We did well to catch an 11.9% move over two months.
Since then, LH has pulled back. The stock is down 9% from its peak.
If it’s going to find support, it’s likely to do so around these levels. This provides us contrarians with another entry point.
LabCorp is an ideal dividend stock for us to trade versus buy and hold. Its fundamentals are compelling. Personalized and preventative medicine are “blood thirsty” practices that will continue to grow in the years ahead.
My primary care doctors kept dropping me because I never went. What was the point? A hammer to the knee? A high blood pressure reading after rushing me back to the too-lit room?
Instead, I hired a preventative medicine doctor who is trained to play offense. To look ahead and get out in front of bad things.
His requirement? Blood. Regular blood panels which will make me a regular at LabCorp.
So yeah, we could buy the stock and “ride the waves” and tell ourselves that over the long run this thing is always going to climb. Say, by 8% to 10% per year, a reasonable return for a stock of LH’s size.
But why settle for that when we can bank 8% to 10%—or more—in multiple trades per year? Same stock. Less risk. Higher returns.
Back to our DST trade. We bought LH low in October and sold high in December. It’s time to buy low again.
Our DST LabCorp Trades
Why here? Shares have dipped just below their weekly moving average. Back in October they found support at this level and I would expect the same this time around.
Because we traders buy low and sell high. On a fundamental basis, LabCorp always looks good. Our contrarian edge—our Dividend Swing Trader secret for 68% annualized gains—is buying the dips and selling the rips within this broader uptrend. This “rental” strategy lets us enjoy the payout and price gains from LabCorp—without having to fret constantly about the Fed.
The nice thing about trading versus buying and hoping is that we can take advantage of short-term opportunities without exposing our portfolios to long-term pain. Bull or bear, I don’t really care when we’re talking about recession-resistant dividends—like this five pack poised to deliver 15%+ total returns for years to come.