Update - July 14, 2020
Lockdowns Are Back: What to Do Now
What’s next?
California reversed its reopening plans. Texas is in trouble. And docs in Florida just compared what is happening in their hospitals to what we saw in Wuhan seven months ago.
The news isn’t great.
It’s downright bad.
Many investors are watching the stock market this week wondering what will happen next… and, most importantly, they’re wondering what they should do with their money.
My advice is simple.
Don’t do anything different.
Stick to your plan. Stay with your exit strategy (hopefully, a trailing stop). And continue to invest small amounts of money into good companies on a regular basis.
It’s that last idea the financial media tends to ignore…
Steady as She Goes
We all know a plan is vital. And the value of trailing stops has been proven many times over. But too many folks wait until market conditions “feel” right before they make their move.
As we saw during the bull run of the last decade, for many folks, that feeling never came.
They missed out on life-changing gains because of it.
Here’s a fact. The bad headlines will keep coming. It’s how the media works. It thrives on blood.
It’s worse than ever.
If you wait for CNN or the nightly news to tell you when to buy, you’ll never get where you want to go.
I’ve been investing a set amount of money into my long-term portfolio every month for decades. I don’t change the amount or the timing based on the news or my intuition – and, watching the markets all day, every day, I like to think my intuition is better than most.
Instead, I set my monthly allocation at the beginning of the year based on my projected income and desired savings rate… and I stick with it regardless of the headlines.
Even through the mess of the last six months, I have not wavered. My portfolio is up significantly on the year because of it.
Save the in-and-out stuff and the market timing for your short-term trading portfolio.
That’s fine.
But it has no place in the sort of long-term portfolio we’re aiming to build with the recommendations I send you each month.
Put Your Money Here…
If that idea motivates you to get off the sideline and put some money to work… great.
Put it in KBR (KBR).
The company is a stalwart in the global infrastructure industry. It builds everything from roads to plastic factories.
But, in a move announced late last month, it soon won’t be working in the energy sector.
It plans to drastically curb its exposure to that market soon.
That’s a good thing.
The company currently has several large contracts in the industry – particularly aimed at building the world’s liquefied natural gas (LNG) infrastructure.
It’s a tough gig.
When I first started covering the industry (well before the 2008 crash), American firms were piling up debt to build pipelines that would import LNG.
But thanks to the fracking boom, those valves were quickly turned around and the system was designed to export huge gluts of excess gas.
And now… the world’s awash in the stuff and nobody wants it.
It’s been quite tough on companies working in the space and modeling their businesses based on the trend.
I’m glad to see KBR getting out of the business, and I believe shareholders will be rewarded for the decision once we get more financial details with the next set of quarterly earnings results (due out on July 29).
Perhaps the biggest number to watch with KBR is this one… the percent of its business aimed at government clients.
The Hand That Feeds Us
In 2015, that figure was a mere 11%.
This year, it’s expected to be 85%.
That’s big.
It means reliable income, healthy margins and no shortage of sales opportunities. In fact, that number is the crux of why I want you to own shares of the company.
As the world’s economy becomes more and more fragile and more and more dependent on government-fueled stimulus, KBR will be at the heart of the spending.
Seemingly every day, it tells us of a fresh contract with some government across the planet.
Again, it creates a reliable source of sales and profits… that turn into a solid source of income for shareholders. At current prices, the company’s dividend yields 1.86% – not bad for a stock with strong appreciation potential.
The bottom line is this…
The news isn’t great. And it could get a lot worse. But this market is highly disconnected from the facts.
The textbooks tell us to stay away… that things are overheated.
Then again, the textbooks were written in the days before massive money printing, zero interest rates and stimulus checks.
With so many governments eager to spend and with so much free money floating around, stocks have no choice but to continue their long-term trend.
It’ll be a bumpy ride, but good, solid stocks like KBR will help smooth it out.
Keep buying.
Be well,
Andy
