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Dividend Stocks: The Only Game in Town

With the stock market at new highs and interest rates near record lows it is difficult to select investments that will have good probabilities of providing acceptable returns in the future. The potential for another stock bear market adds to the difficulty of where to invest your money. My analysis and forecasts indicate a dividend stock focused strategy has a strong chance of providing superior returns over the next decade.

Billionaire Howard Marks is Co-founder and Co-Chairman of Oaktree Capital Management, a global asset management firm specializing in alternative investment strategies Several times a year he publishes a memo that covers different aspects of investing and investment asset classes. Marks likes to put out warnings to be cautious when he sees over-exuberance in different asset classes. The most recent memo came out on July 26. Before going into a deep discussion, he highlighted these four points about the current investing environment:

  • The uncertainties are unusual in terms of number, scale, and insolubility in areas including secular economic growth; the impact of central banks; interest rates and inflation; political dysfunction; geopolitical trouble spots; and the long-term impact of technology.
  • In the vast majority of asset classes, prospective returns are just about the lowest they’ve ever been.
  • Asset prices are high across the board. Almost nothing can be bought below its intrinsic value, and there are few bargains. In general, the best we can do is look for things that are less overpriced than others.
  • Pro-risk behavior is commonplace, as the majority of investors embrace increased risk as the route to the returns they want or need.

Marks also notes, “Most people (a) are conscious of the uncertainties listed above, (b) recognize that prospective returns are quite skimpy, and (c) accept that things are unlikely to go well forever. That’s all healthy.” However, he then provides the caveat that, “…most people can’t think of what might cause trouble anytime soon.”

I see several likely scenarios for stock and bond investment results over the next decade. I place a higher probability on a decade of low average returns from markets that are very choppy. This means one or two stock market corrections a year with declines of up to 20%. This is the natural outcome of an economy...


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