It has been a bruising month for the markets and every day seems to
bring more bad news. Big banks and financial concerns have been
failing daily. At the current rate, it'll soon be hard to open a
savings account in the Untied States. Fear has infected the markets
and it is moving to main street.
Problem is, even if Congress gets around to passing some sort of
bailout package, the patient might already be dead.
Are you panicky yet?
Well, stop it and get a grip.
These sorts of panics happen in the stock market reasonably often.
What is the best defense? To buy and hold stocks with a large margin
It just so happens that one of the best times to buy good stocks with
large margins of safety is during market panics. You don't want to
buy everything but you should be looking for stable firms trading at
very low prices relative to their business values.
Survival is easy when you don't need to borrow money. It is even
easier when you're a cash generating machine like a cigarette company.
Due to the current panic you can get yields north of 6% from big
tobacco. Can these stock go down? Sure thing. Even cash generators
can decline in a panic. But some are starting to look quite
Company Price P/E Yield Div.Grow Leverage
======================= ====== ===== ===== ======== ========
Vector Group (VGR) $17.83 20.3 8.52% 5.0% 8.3
Reynolds American (RAI) $48.78 9.4 6.97% 11.4% 2.3
Lorillard (LO) $68.49 14.0 5.37% 2.6
BAT ADR (BTI) $61.50 14.7 2.57% 13.5% 3.2
Star Scientific (STSI) $3.36 -12.0 0.00% 4.0
Source: msn.com, September 29, 2008
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