Yesterday I said look at distressed financials.
I like to see what sectors have been punished to the point of being totally beaten down and distroyed.
There are 2 sectors right now in that category. Auto and financials.
I am not goiong to look at auto's now due to the economic cycle of personal spending habits. People are pulling in their spending habits due to the rise in gas prices and utilities, therefore they will not buy a new car as readily as they used to.
The fed has been saving the financials Since August of 2007 from a full blown panic so we don't create a depression like the 1929 crash. Since the Fed knows that they have to keep the market and the financials sound, so the depression doesn't happen, that is why I look to buy the best of the beaten up sector. A stand out in the crowd is ACAS.
They have increased their dividend every year (which is the critical part) and have old loans on the books that people will not default on due to the fact they have too much equity in the loans. This would allow the borrowers the ability to refinance to buy time if they had a tough time of paying the loan off.
The market is punishing this company because so many bank stocks have cut their dividends and the big buyers are anticipating that ACAS will do the same. Therefore they are pricing the stock as though it will cut the dividend by 40%. Right now the stock is yielding 16%.
Even if they cut the dividend in half the stock will yield 8%. So put your money here and wait long term to have the financials come back. While we wait I will be happy to collect 16% on my money.
If any of my readers know of other quality stocks like ACAS please write back to me so I can share it with the others.