We're losing her! The stock market is...disappearing.
The issuance of new stock is at a 50-year low. Thanks to private-equity buyouts, mergers and acquisitions, and corporate stock buybacks, over one trillion dollars of stock float has disappeared this year.
Frankly, this is great news for growth investors. I love watching the stock market melt away because fewer stocks mean bigger profits for me and especially members of my Blue Chip Growth service. This is the fourth year in a row that the stock market has shrunk, and it will be the eighth time in the last 10 years that our Blue Chip Growth Buy List has beaten the market. Let's just say that that's not a coincidence.
In 10 years, our Buy List is up 240% which is three times better than the overall market. How have we been so successful? Easy--we've been able to spot the areas where the buyouts, mergers and stock buybacks have been the strongest.
I'll give you a perfect example. Baxter International (BAX), one of my favorite stocks on my Blue Chip Growth Buy List, reported blowout earnings yesterday. The Street was expecting 66 cents a share, Baxter gave them 70 cents. The company also raised its full-year outlook for the third straight quarter.
At yesterday's open, there was a buying panic, and shares of BAX exploded 10% higher. Not bad for a morning's work! Best of all, this is just the beginning. We have 14 more Blue Chip Growth stocks scheduled to report next week.(If you want to get in on the action, you can get more details on how to join Blue Chip Growth at this link.)
My strategy is to find companies on the receiving end of Wall Street's buying frenzy. I recently laid out this approach in my new book, The Little Book That Makes You Rich. I like to think of my strategy as being both low-risk and fast-growth, and if that sounds like a contradiction, you're not alone. This is what The New York Times said:
In short, he has done the seemingly oxymoronic, and done it well: He has written a book on growth investing that ends up being conservative in its approach.
Keeping your risk level low is my top priority. Whether you're in the market or not, your first step should be to log on to my PortfolioGrader Pro stock-rating tool. This tool gives you Buy-Hold-Sell advice on over 5,000 stocks. So before you make a market move, visit PortfolioGrader Pro and see how your portfolio-or any single stock-stacks up. (Don't forget to check out the Top 3 rated stocks by sectors. National Oilwell Varco (NOV) is an A-rated oil stock and also one of my top Blue Chip Growth stocks.)
Now back to the incredible shrinking market, I have to let you in on the secret behind all these stock buybacks. The secret lies within three little letters, I-R-S. Yep, these buybacks are part of Corporate America's plan to avoid taxes and pay itself more through dividends instead of salaries. Dividends, of course, are taxed up to 15% on the federal level, while income is taxed up to 35%.
The result is that a familiar pattern has emerged. First, companies implement a stock buy-back program, which increases management's ownership. Then, the company boosts the quarterly dividend.
Here's the kicker. No one complains because when management pays itself through dividends, they're enriching shareholders as well. The new 15% rate on dividends is basically a win-win for everyone.
Recently, some of the biggest stock buybacks in history have been implemented. Chevron (CHV) approved a $15 billion buyback, and Procter & Gamble (PG) announced one for up to $30 billion. Wall Street has tons of money sitting around and fewer places to put it. This is why I expect 2008 to be our best year ever at Blue Chip Growth.
But I have to urge you not to be a spectator. Consider two facts: First, the Federal Reserve meets in two weeks. Personally, I think they'll cut interest rates by 0.25%. Last time, I was one of the few on Wall Street who correctly predicted a 0.5% cut, and that's when the market soared over 330 points. The same thing could happen again.
The other reason to get in the market now is that this is the seasonally strong time of year. Since 1950, an investment of $10,000 in the market from November 1 to April 30 would have turned into almost $400,000. But for the other six months of the year, that $10,000 would have shrunk down to just $9,160. Think about that for a moment. All of the market's gains have come during the six months immediately following Halloween.
I'm currently working on the November issue of Blue Chip Growth, and I'm laying out our strategy for the next six months. In this issue, I'm selling two stocks and adding four exciting new buys. In fact, one of our new buys just saw its profits rise by 220%. I also have a detailed report about the seismic shift out of value stocks. Basically, stocks that you think are safe and secure may not be.
Follow this link to get one year of Blue Chip Growth for $149, or two years at $249 (an even better deal). I've been a professional investor for 30 years, and I stand behind my work 100%, so if you don't like our low-risk fast-growth strategy, you can cancel at any time for any reason within the first six months for a full refund.
I hope you'll join us today.
