As we move through 2019, uncertainty is growing among individual and institutional investors…and threatening returns on income stocks.
In addition to uncertainty surrounding tariffs, interest rates and economic growth, the stock market is increasingly driven by institutional trading algorithms. The prevalence of these “trading bots” means individual stocks are increasingly swept up in sharp market moves — up and down.
Despite this, I remain a firm believer that careful stock picking will continue to be the best way to earn out-sized returns in 2019 and beyond.
As we come into the summertime, I’ve had more people asking me, “Michael, which companies can I use to get more income from my portfolio this year?”
Over the last seven years, as I’ve educated and advised options traders in selling options, I’ve always kept a “bullpen” list of income stocks.
By that I mean my “go-to” list of dominant companies with consistent premiums which can be traded every week of the year for substantially higher returns (income) from your portfolio.
The traditional definition of an income stock – a company that pays high dividends – has been replaced by a new breed of income stock:
Companies with appreciation potential and substantial premiums on weekly put and call options; options that investors can SELL to generate weekly cash income.
I’ve put my research and analysis together to identify the best 15 Income stocks to own and trade in 2018, and together, you can use these stocks for potential total annual income of 47% from your portfolio this year!
I call them Income Dominators.
Each Income Dominator company meets the following criteria:
• Undervalued stock trading at a discount to long-term growth prospects
• Strong fundamentals in earnings, sales and profit growth
• Consistently higher than average premiums for options sellers
• Accessible to any level of investing or trading portfolio (meaning, you don’t need a million bucks to profit with these companies)
Plus, every one of the stocks on my Income Dominators list was traded by me during 2018 – so not only do I know these companies inside and out, I also know exactly what the full-year income potential is for each one.
Key Trends for 2019
I use a process perhaps different from most people in the investing marketplace. I begin with Trends – consumer, business and manufacturing trends driving the market. Then I look for the best companies profiting from those trends. Let’s take a look at the top four trends which I believe will dominate the market in 2019, and the companies that are best positioned to capitalize on those trends.
I am a big believer in the ongoing growth in travel by Millenials and Boomers, a group which represents 170 million American consumers, alone. This group of consumers spends their money on “experiences” rather than hard goods – a trend which developed in 2012 and continues today.
That’s why I’ve selected several companies in the travel sector as Income Dominators: they have the strongest fundamental and earnings growth potential and include:
• An under-valued airline with consistent premiums available for options sellers that can return 77% in annual income.
• A cruise line operator with a potential annual return on capital of 38% serving the growing market of fixed cost travel experience.
• An online “800lb Gorilla” which continues to dominate the travel market through multiple businesses and projects annual return on capital of 42%.
• A hotel chain with over 30 brands and a recent acquisition which is pushing shares higher and offers a 31% return on capital in 2018.
As you’ll discover, I believe we’re at the beginning of a massive “Super Cycle” in technology. That cycle means new products in tech and new products in tech means a long-term trend (up) in semiconductor and chip stocks.
It also means the companies with the best products and the best channels for sales growth will be the winners in 2018.
I have four of them in my Income Dominators list for 2019:
• The most unloved and misunderstood tech company which simply prints money quarter after quarter and gives conservative (yes, conservative) investors the potential for 25% return on capital this year, over and above any potential price appreciation.
• A chipmaker on the forefront of a new Consumer Tech Super Cycle which has only begun to appreciate in value and has potential cash returns of 35% (and possibly higher) in 2019.
• Mobile payments is one of the biggest trends for investors to capitalize on starting now and this digital payments processor is my hands-down favorite company in this space.
• Another chipmaker with memory chips at the heart of the Tech Super Cycle but prone to larger price swings based on rumors not news. Still, at 41% annual return on capital, this one company should be an income investors go to stock for weekly income.
I have three energy companies, all of which are less dependent upon the rise or fall in oil prices as they are self-contained companies or in alternative markets which continue to see growth.
They can be more volatile week to week, but they must be considered by any investor or trader for the consistently strong premiums they offer.
• This one company has been a go-to source of income trades for me for over three years and I see no reason to stop collecting the cash from one of the best independent refiners in the U.S. Premiums on this company are generous from week to week, which results in a potential 38% annual return on capital.
• An unusual company with a dominant market position in the U.S. which generated over 40% in annual returns in 2018 and continues to grow and expand its operations which results in a potential return of 44% in 2019.
It’s no secret that in 2018, retail stocks were one of the most unloved (hated?) sectors in the economy – and with good reason. Nearly every consumer retail stock is being measured against Amazon. If you look carefully, however, you can find stocks which are immune from the Amazon effect or are beating Amazon in their categories.
Here are three of them:
• The “sure thing” automotive company which is finally getting the recognition it deserves for strong profit growth but which continues to trade at a discount to that growth. With a limited trading range, this is one of the “safest” stocks any investor can sell options on and generate a potential 33% annual return on capital.
• An “athleisure” wear company which has rebuilt its entire product line to better compete against Amazon and is another of the companies in the Millenial and Boomer trend (they do spend money here). Traded every week (and one can), this company offers potential annual return on capital of 44%.
• An Amazon competitor which is actually succeeding with strong revenue, profit growth and double-digit sales growth and attractive enough premiums for the conservative trader to pay annual return on capital of 27%.
There it is – if you look hard enough you can find companies and stocks offering outstanding income returns at a time when most people are getting less growth and less income from their portfolios.
Now, if you put all 15 stocks to work for you in your portfolio, based on my projections, you could pay yourself $47,800 (and potentially more) in 2019 income. If you aren’t getting that much income from your portfolio, you need to learn how.
Plus, if you want the actual names plus my bonus training materials to learn how to profit from the companies:
About The Author
Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.
Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. He has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.
He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com, and he is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.
His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.