CWS Market Review – April 2, 2024

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Over the weekend, I posted what I thought was a harmless joke on Twitter (or X, or whatever we’re supposed to call it these days):

Most people who saw my tweet took it as an obvious joke. At last count, the tweet had over 10,000 “likes.” Indeed, it’s hard to parody some of the financial advice you see on TikTok (check out the brilliant @TikTokInvestors for a sample).

However, not everyone saw my tweet as humor. Of course, U.S. Treasuries yield nowhere close to 8%, and most people don’t have a handy three million dollars lying around. This is a reminder of Poe’s Law that any sarcasm, no matter how absurd, will be taken seriously by someone, and those someones were angry at me. Very angry.

You may wonder: how could our meek, humble, dutiful editor ever cause anyone any distress? Alas, it can happen.

My tweet even got a famous Community Note attached to it. They literally fact-checked a joke.

If I were the pedantic type, I’d point out that the Community Note is incorrect because a two-month treasury is a bill, not a bond. Happily, I’m not, so I won’t bother to mention it.

How to Invest $100,000

I’ve always believed that one should try to turn an unpleasant experience unto something positive. Therefore, in today’s issue, I want to show you how you can safely build an income-producing stock portfolio. Unfortunately, it won’t yield 8%, but it can do a good job.

Let’s start with these ten blue chip stocks. Most have long histories of increasing their dividends, and several of them also have above-market dividend yields.

AFLAC (AFL)
Archer-Daniels-Midland (ADM)
Federal Realty (FRT)
Illinois Tool Works (ITW)
Johnson & Johnson (JNJ)
Microsoft (MSFT)
Middlesex Water (MSEX)
Stanley Black & Decker (SWK)
Sysco (SYY)
Target (TGT)

The only exception is Microsoft. I added the tech giant for diversification even though it pays a small dividend.

The point I want to stress is that building a portfolio isn’t simply selecting names you like. I selected these ten because they make for a well-rounded portfolio. A portfolio is a cohesive whole. It all needs to work together. It’s like a baseball lineup. For example, we have retail, consumer, industrials, financials, utilities and REITs. Some will do well when others are lagging.

Also, bear in mind that this is a portfolio designed to produce income. It’s not going to be a fast grower. Go to crypto if you want excitement. This portfolio won’t be exciting, but it should hold up well in rapid bull markets.

My goal with this portfolio is to show you the key concepts in designing a portfolio with a specific goal in mind.

A good portfolio can be well diversified with as few as eight stocks, and it can be poorly diversified with 100 stocks.

Here’s a sample portfolio with our ten names:

I’ve listed each stock’s ticker symbol, total number of shares, Monday’s closing price, dividend per share, the value of each position, projected dividend income and the yield.

I used $100,000 as a sample, but feel free to multiply or divide these positions to satisfy your portfolio needs.

As you can see, this portfolio yields a healthy 2.66% per year, plus these are safe and secure stocks.

Next, I want to show you the power of dividend income. What if we had bought those ten stocks 20 years ago? Here’s how much you would be yielding on those stocks today if you had bought them in April 2004:

It’s odd to think that you would be yielding close to 10% with JNJ, but that’s what it would be based on a 20-year-old original purchase price.

Sure, 20 years is a long holding period, but the important point is that with investing, time is on your side.

Consider this thought exercise. Let’s say there’s a stock that currently yields 0.5%. Many income investors would quickly overlook it.

Let’s also say that this company grows its earnings and dividend consistently by 15% each year. If the valuation stays the same, then the dividend yield is always 0.5, but that’s masking how strong those dividends have been. In reality, the dividend income has strongly aided your returns. That’s why Einstein called compound interest, “the Eighth Wonder of the World.”

ISM Manufacturing Increases to 50.3

I should caution you that the stock market has looked a little weaker in recent days. There’s nothing to be alarmed about. After all, the market has had a strong run over the last five months, so some weariness is to be expected.

The S&P 500 was weak on Monday, and it was down over 1.1% today before it wandered higher this afternoon. So far, the bulls have been able to repulse any bear attacks, but I wonder how much longer that can last.

Tech stocks were especially weak today. The Nasdaq Composite lost nearly 1%. Tesla, which was already the worst-performing stock in the S&P 500 during Q1, lost another 5% today.

Oil rallied to $85 per barrel while the yield on the 10-year Treasury got up to 4.36%. That’s the highest this year.

I wanted to mention yesterday’s impressive ISM Manufacturing for March. The reading increased from 47.8 to 50.3. This is important because any number above 50 means that the factory sector of the economy is expanding. The ISM had been contracting for 16 consecutive months.

I also like to look at the ISM because it’s out fairly quickly. Most economic stats take a while to compute, but the ISM report is usually out on the first working day of each month.

Tuesday’s report on job openings said that openings are largely unchanged at 8.8 million. That report was for February. Over the last year, job openings are down by 11%. Also on Tuesday, the Census Bureau said that construction spending fell by 0.3% in February. Private spending was unchanged, but public spending fell.

The next big test for the market comes this Friday with the March jobs report. Wall Street thinks the U.S. economy created 200,000 new jobs last month. I’ll be curious what the wage numbers are. The consensus on Wall Street is that average hourly earnings increased by 0.3% last month.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Posted by on April 2nd, 2024 at 6:16 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.