In part one of this series, I explained why the dangerous market bubbles in popular stocks such as Airbnb, Tesla, and DoorDash could cost investors a fortune in the coming years.

Now I want to help you learn how to spot safe anti-bubble blue-chips, that can be safely purchased even in today’s market bubble.

Even in This Market Bubble, Great Companies Are Always on Sale

In March 2000 the S&P 500 hit a forward PE of 27.2. This was the greatest stock market bubble in US history. It meant stocks were 66% historically overvalued. And over the next 10 years investors earned –1% annual total returns as a result.

You might imagine that there were no good investments you could make in the most extreme bubble in US history. After all, when even Coca-Cola (KO) was trading at more than 40X earnings, how could any investor find a good deal?

Great blue-chip deals are always available, no matter how overvalued the stock market gets.

• Berkshire Hathaway (BRK.B) was 50% undervalued in March 2000
• Realty Income (O) was 50% undervalued in March 2000. Its price to cash flow was 7X and it yielded a very safe 11%.
• Enterprise Products Partners (EPD) was 50% undervalued. Its price to cash flow was 6X and it yielded a very safe 12%

Prudent long-term investors who avoided paying crazy valuations for stocks, didn’t just avoid the stock market’s “lost decade” they made a fortune.

• BRK investors who bought during the tech bubble low made 25.1% annually over the next 15 years.
• Realty Income investors made 17.7% annually
• Enterprise Products Partners investors made 23.8% annually

Smart long-term investors who recognized the difference between value and price during the tech bubble made 1,100% to 2,800% returns over the next 15 years. They literally achieved results on par with the greatest investors in history. More importantly, they locked in the kinds of safe, generous, and steadily growing dividend yields that rich retirements are made of.

(Source: Imgflip)

Think that such glorious Buffett style “fat pitches” were only available in the 2000 tech bubble, created by outrageous excesses back then?

Think again.

The Fattest Pitches On Wall Street Today

(Source: F.A.S.T Graphs, FactSet Research) 

Today you can still find fast-growing companies trading at single-digit multiples, pricing in little or even negative growth.

Bristol-Myers 2022 Consensus Return Potential 

(Source: F.A.S.T Graphs, FactSet Research)

Bristol-Myers 2025 Consensus Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

What if a 3% yield isn’t attractive enough for you? How about a safe 5% yield that analysts expect to grow about 12% CAGR over time?

ABBV 2022 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

ABBV 2025 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

What if you need an even higher safe yield than 5%? How about a safe 7%?

BTI 2022 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

BTI 2025 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

What if you REALLY need safe income right now, and don’t have time to wait for dividends to grow? How does a safe 9% yield sound?

MMP 2022 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

What if you’re on the opposite end of the yield spectrum and looking for pure growth but want to avoid paying dangerous and speculative valuations that could cost you a fortune when the bubble bursts?

AMZN 2025 Consensus Total Return Potential

(Source: F.A.S.T Graphs, FactSet Research)

Regardless of your needs, or risk profile, quality blue-chips are always on sale. Not just offering high-quality at a reasonable price, but often Buffett-like returns that are on par with the greatest investors in history.

You don’t have to be a genius to achieve your long-term financial goals on Wall Street. You just have to make reasonable and prudent decisions, with discipline, consistency, and then hold those companies for the long-term.

(Source: Imgflip)

Or, as Charlie Munger, Buffett’s right hand at Berkshire for decades and one of the greatest investors in history, would say, make “consistently not stupid decisions.”

Speculators pray for luck on Wall Street. Prudent long-term investors make their own.

Want More Great Investing Ideas?

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SPY shares were trading at $367.99 per share on Friday morning, down $4.25 (-1.14%). Year-to-date, SPY has gained 15.97%, 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...

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