Doc's safe stocks... CVS' great earnings... How readers saved $2,200 in a year... Are dividend-paying stocks toppy?... Good feedback for True Income...
Retirement Millionaire editor Dr. David "Doc" Eifrig recommends the safest, highest-quality stocks for his readers... The foundation of his model portfolio is built on healthy companies that generate loads of cash and treat shareholders well by buying back stock and paying strong dividends. These are companies with long histories of consistent operations that should still be generating profits decades from now.
For example, Doc loves U.S. drugstores... These companies, like CVS Caremark and Walgreens, have the tailwinds of one of the biggest trends in the market today – the aging of the Baby Boomers. As Doc wrote in his June 2011 issue...
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The fastest-growing segment in the U.S. is the Baby Boomer crowd, the generation born between 1945 and 1964. For them, health care becomes increasingly important... The growth rate of 65 year olds in the population will explode in the next 20 years. |
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Companies that provide quality health-care goods and services at fair prices to this aging U.S. population should make a fortune, no matter what happens in Washington. |
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Older people use three to four times the amount of prescription drugs as folks under 50. And more than 30 million people will gain Medicare coverage by 2014. This means an increasing number of written prescriptions. |
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Right now, only 10% of Medicare dollars are spent on pharmaceuticals. If Washington starts looking for cost-effective ways to manage health, prescription drugs will be a quick and easy way to test its hypothesis. In many cases, the use of drugs can ward off diseases for many years. For example, doctors already know blood-pressure pills and diabetes medications prolong lives cheaply. |
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This demographic shift means big opportunities for companies delivering drugs. Pharmaceuticals could easily grow to 15%-16% of the Medicare pie this decade. And the over-the-counter (OTC) markets will grow along with it. If you're a one-stop shop for health care, you're bound to ride this wave. |
CVS Caremark is that kind of "one-stop shop." It employs 280,000 people nationwide. It's the No. 1 provider of prescriptions in the U.S. and the largest employer of pharmacists and nurse practitioners (advanced nurses who can write some prescriptions). And around 75% of the U.S. population lives within three miles of a CVS store.
The company also has a pharmacy benefits management business (PBM). A PBM is a third-party administrator of prescription drug programs. They leverage their huge network of drug users to negotiate lower prices for employers and governments.
CVS Caremark's third business is called "Maintenance Choice." It gives patients convenient access to inexpensive drugs. (CVS offers 90-day supplies of drugs at mail-order prices, which it can offer through the mail or in-store pick up.)
In addition to a strong business operation, CVS has a solid balance sheet and a safe (and growing) 1.4% dividend. The company also buys back stock – more than 4% of the market cap in each of the past two years.
This week, CVS Caremark announced second-quarter profit rose to $966 million from $816 million a year earlier. Revenue increased 16.3% to $30.7 billion. The company also increased its forecast for full-year earnings to $3.32-$3.38 per share, up from a May forecast of $3.23-$3.33. And the company raised its quarterly dividend in 2012 to $0.163 from $0.125.
CVS shares are trading for a little more than $45 (off from the all-time high of $48). Retirement Millionaire subscribers are up about 20% since the May 2011 recommendation. And Walgreens is up about 10% since Doc recommended it last November.
Doc's Retirement Millionaire portfolio is currently loaded with high-quality companies like CVS Caremark, Wells Fargo, and Abbott Laboratories. But a Retirement Millionaire subscription provides even greater benefits than the individual stock picks... Doc teaches his readers how to invest and how to manage a portfolio. He stresses the importance of "asset allocation" – the balance of asset classes in your portfolio. This simple idea is probably one of the most important concepts for investors to grasp.
Diversifying your portfolio, never putting too much money in any one recommendation, and cutting your losses is the best formula for safely making money in the market.
His newsletter is also loaded with money-saving tips, travel secrets, health tips, and retirement loopholes. All these ideas are archived for constant reference. And the money you'd save from just one of Doc's tips could more than pay for the subscription (which means you get the excellent investment education for free).
Doc actually tracks how much his readers could save using his tips... In the past 12 months, they've saved more than $2,200.
We want all of our readers to try Retirement Millionaire. It's one of the most valuable newsletters we publish... And Doc is one of the most experienced analysts on our staff. (He's a medical doctor with an impressive Wall Street pedigree.)
That's why a one-year subscription to Retirement Millionaire only costs $39 a year. And the offer is completely risk-free... If you don't like Retirement Millionaire after four months, we'll refund 100% of your money, no questions asked. To learn more about subscribing to Retirement Millionaire, click here...
The stocks Doc focuses on in Retirement Millionaire – high-quality companies paying healthy dividends – have experienced a major bull market in the past few months. When you buy stock in companies that constantly increase dividends and buy back shares, you don't have to constantly worry about them – in Doc's words, they let you "sleep well at night." You can leave them in your portfolio... and compound the returns over years.
Our Editor in Chief, Brian Hunt, discussed the popularity of these companies (which Dan Ferris calls "World Dominating Dividend Growers") in today's issue of our free daily e-letter, DailyWealth.
In an essay titled "The Lazy, 'Do Nothing' Way to Safely Make Money in Stocks," Brian notes, the world's largest retailer, Wal-Mart, is up 30% in the past three months... Take a look at this two-year chart...
The story is the same for fellow blue chips Coca-Cola, Johnson & Johnson, and Abbott Labs, all of which have soared recently.
[Editor's note: These stocks dot the portfolios of several of our editors... For example, you can find all four in the roster of World Dominating Dividend Growers that Dan Ferris maintains in The 12% Letter. All are showing gains for his subscribers.]
After the huge run-up in high-quality, dividend-paying stocks, are we nearing a top? Brian doesn't think so...
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These huge moves [in high-quality, dividend paying stocks] have journalists and investment "experts" crawling out of the woodwork to claim that "dividend stocks are in a bubble." I know these claims have frightened some investors... even to the point of selling their positions. |
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What should you do in this situation? Should you sell because these stocks have soared so much recently? Should you sell because people are saying dividend stocks are in a "bubble"? |
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First of all, you should realize that anyone who says dividend stocks are in a bubble doesn't know his financial history. And he doesn't know what a market bubble looks like. |
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In a market bubble, like Internet stocks in 1999, a huge amount of "non-investors" get into the game. In a real bubble, personal trainers, taxi drivers, and schoolteachers suddenly become "experts" on the hottest stocks. In a real bubble, the hot stocks are all you hear about in the press. In a real bubble, stocks trade for 50... 100... even 200 times earnings. |
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We're nowhere near that with dividend stocks. |
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Sure, dividend-payers are getting a lot more press, and they've run much higher, as we predicted. But they are nowhere near "bubble" status. They are nowhere close to Internet stocks in 1999. So dismiss the ignorant talk of a "dividend bubble." |
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If you took our advice to buy many of the dividend stocks that are soaring right now, here is what you should do: Nothing. |
New 52-week highs (as of 8/7/12): SPDR S&P International HealthCare Sector Fund (IRY), Anheuser-Busch InBev (BUD), Monsanto (MON), Brookfield Asset Management (BAM), Chevron (CVX), ExxonMobil (XOM), and Target (TGT).
Retirement Millionaire isn't the only newsletter Doc Eifrig writes... He also writes Retirement Trader, which focuses on selling put options. And he recently took the reins at True Income, our corporate bond letter. He's receiving great feedback so far... Send any Doc-related praise – or praise for anything else we do – to feedback@stansberryresearch.com.
"Thanks very much for the concerted effort to update the True Income subscribers with important information about some of the holdings. My reading experience with your recent stewardship of this newsletter is very enjoyable and informative. I feel like you actually care about our future returns, and not just trying to get us to subscribe to additional newsletters.
"Your easy writing style encourages me to read and follow your train of thought: encouraging me to take an active interest in the portfolio.
"Thanks very much for 'stepping up' and filling [in], I'm very lucky to receive this 'upgrade' in my subscriptions." – Paid-up subscriber Sean Kadovitz
Regards,
Sean Goldsmith
New York, New York
August 8, 2012