Investors Hate This Sector Right Now. Time To Get Greedy…
The Battle of Waterloo on June 18, 1815 not only marked the end of Napoleon Bonaparte’s storied military career, but it also gave birth to the fabled story of Baron Rothschild making a fortune from the deadly battle.
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Some versions of the events claim that Rothschild witnessed the battle in person then quickly rode to the coast where he bullied and bribed a fisherman into ferrying him to England through a terrible storm. He reached London 24 hours before official news of the outcome of the Battle of Waterloo, where he spread rumors that Wellington had been defeated by Napoleon, causing a panic in the stock market.
#-ad_banner-#When prices reached rock bottom, it’s believed that Rothschild bought up large swaths of shares, and once news reached that Napoleon had been defeated, the stock market soared and he quickly doubled his money.
The legend goes on to say that he later told investors that “The time to buy is when there’s blood in the streets.”
Be Greedy When Others Are Fearful
This same adage is used today by some of the world’s best investors. It’s no secret that some of the biggest market gains throughout history are a result of buying when others are fearful. For example, Warren Buffett bought shares of ailing Bank of America (NYSE: BAC) in August 2011. Shares are up more than 200% since then.
It’s with this contrarian mindset where I found the most recent pick for my premium newsletter, Top Stock Advisor.
You see, despite this historic bull market, there’s a group of stocks that has been getting crushed lately. These aren’t some fly-by-night companies or volatile biotech stocks. In fact, these companies happen to be some of the oldest and sturdiest firms in the world.
I’m talking about consumer staples.
It’s Time To Get Defensive
These are the essentials that we must buy regularly. Things like toothpaste, paper towels, and laundry detergent. And these household and personal care items are a massive market. Publicly traded staples companies in the United States pulled in nearly $2 trillion in sales in the past year, compared to the communications sector which tallied $1.2 trillion in sales.
Typically, these businesses are more stable and less cyclical than many other sectors. They may not be sexy or on the cutting edge of innovation, but that’s OK. A well-run consumer staple company can deliver reliable returns to long-term oriented investors.
One reason is because staples don’t usually take as big of hit during times of economic weakness. After all, folks are going to buy toothpaste and soap regardless of how well the economy is doing.
As a result, these types of companies tend to hold up relatively well during economic downturns. When things get scary, many investors seek out the relative safety of this defensive sector. For instance, after the S&P 500 peaked on March 24, 2000, and subsequently shed nearly 50% over the next 31 months, consumer staples as measured by the Consumer Staples Select SPDR ETF (NYSE: XLP) were only down 1.5% over the same period.
But lately, these “boring” old companies have been getting shunned by investors. Just look at what’s happened with a former consumer staples stock holding in Top Stock Advisor: Procter & Gamble (NYSE: PG).
Since closing out of the position in January for a 40% gain, the stock went on to shed more than 20%.
And this isn’t an isolated case… across the board, consumer staple stocks have been underperforming. But I think that they’re poised for a turnaround.
We’re nine years into this bull market, and although I have no idea when it will end (maybe we’ve already seen the peak), I’d like to get a bit more defensive. And right now, we can beat the crowd and snag some of the best consumer staples businesses for great prices.
Get Your Hands On My Latest Report
While I can’t reveal the name of my latest pick out of fairness to my Top Stock Advisor subscribers, you should consider researching some of the top consumer staples names. You might be surprised at the value you can scoop up in this overheated market.
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