In part one of this series, we covered two very easy ways to avoid costly mistakes with your retirement portfolio.
Now let’s look at the best way to directly profit from the COVID surge.
Take Advantage Of Short-Term Market Insanity
This is why I ignore 12-month price targets from analysts.
|Time Frame (Years)||Total Returns Explained By Fundamentals/Valuations|
|11+||90% to 91%|
(Sources: DK S&P 500 Valuation And Total Return Potential Tool, JPMorgan, Bank of America, Princeton, RIA)
It’s also why I avoid market timing and speculating about what stocks will do in any given week, month, or even year.
In the short-term sentiment, momentum, and just plain dumb luck drives almost all stock returns.
But in the long-term, fundamentals are 11X as powerful as luck. That’s the key to getting and staying rich on Wall Street.
Even during this ultra-low volatility year, we’ve seen tech corrections, and corrections in small-caps (Russell 2000).
We’ve seen re-opening stocks like cruise liners and airlines crash when delta cases surged.
Now many of these reopening stocks have seen significant and long-lasting fundamental deterioration due to higher debt, and the fact that it may take several years for demand to fully recover from the pandemic.
But consider this. Industrials are both cyclical, and thus tied to the health of the economy, and some of the best companies to own should we pass a $4 trillion infrastructure package.
One Of My Favorite Ways To Profit From The Delta Surge
It’s fallen into a severe correction that makes absolutely no sense.
(Source: investor presentation)
BWA is poised to have incredible hyper-growth powered by its dominant position in EV and hybrid drive trains.
(Source: FactSet Research Terminal)
Analysts expect BWA’s strong position in EVs and hybrids to drive industry-leading hyper-growth over the long term.
Safety score: 76% – 4/5 – safe
Dependability score: 71% – 3/4 – very dependable
Quality score: 74% – 10/12 SWAN (Sleep Well At Night)
Long-Term Risk Management Consensus: 70th industry percentile – good
2021 average fair value: $67.66
2022 average fair value: $71.77
12-month blended forward harmonic average fair value: $70.19
Discount To Fair Value/Margin of safety: 35%
DK rating: a potential very strong buy
Long-term growth consensus: 24.7% CAGR
Long-term consensus total return potential: 26.2% (vs. 9.9% for the S&P 500 and 11.2% aristocrats and 16.2% Nasdaq)
BWA 2023 Consensus Total Return Potential
(Source: FAST Graphs, FactSet Research)
BWA 2026 Consensus Total Return Potential
(Source: FAST Graphs, FactSet Research)
BWA Investment Decision Score
|Ticker||bwa||DK Quality Rating||10||74%||Investment Grade||A-|
|Industry||Auto Components||Dependability||3||71%||5-Year Dividend Return||8.42%|
|Sub-Industry||Auto Parts & Equipment||Business Model||3||Today’s 5+ Year Risk-Adjusted Expected Return||14.57%|
|SWAN, Phoenix, Hyper-Growth, Strong ESG|
|Valuation||4||Very Strong Buy||bwa’s 35.31% discount to fair value earns it a 4-of-4 score for valuation timeliness|
|Preservation of Capital||5||Average||bwa’s credit rating of BBB implies a 7.5% chance of bankruptcy risk, and earns it a 5-of-7 score for Preservation of Capital|
|Return of Capital||N/A||N/A||N/A|
|Return on Capital||10||Exceptional||bwa’s 14.57% vs. the S&P’s 3.51% 5-year risk-adjusted expected return (RAER) earns it a 10-of-10 Return on Capital score|
|Total Score||19||Max score of 21||S&P’s Score|
|Investment Score||90%||Very Good||73/100 = C(Market Average)|
|Investment Letter Grade||A-|
(Source: Dividend Kings Automated Investment Decision Score)
BWA is one of the best ways for prudent long-term income investors to profit from the global $128 trillion green energy gold rush.
This is just one of the dozens of examples of world-class blue-chip bargains you can buy during the Delta surge whose long-term fundamentals are almost certainly not going to be impaired.
In other words, BWA is a great way to make your luck on Wall Street, taking advantage of short-term fear because you’re focused on the much brighter post-pandemic world.
SPY shares were trading at $443.43 per share on Friday afternoon, up $3.57 (+0.81%). Year-to-date, SPY has gained 19.38%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Adam Galas
Adam has spent years as a writer for The Motley Fool, Simply Safe Dividends, Seeking Alpha, and Dividend Sensei. His goal is to help people learn how to harness the power of dividend growth investing. Learn more about Adam’s background, along with links to his most recent articles. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|SPY||Get Rating||Get Rating||Get Rating|