This One Fact Should Change the Way You Invest

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club
Shooting_Range_Target

The stock market is shrinking...

And that fact should change how you invest.

According to Wilshire Associates, which compiles benchmarks for U.S. stock markets, the number of public companies peaked at around 7,500 in 1997.

Last year, that number dropped to about 3,600.

In fact, since 1970, the number of public companies has dropped 52% while the S&P 500 has increased 3,628% (including dividends).

Despite the decrease in the number of publically traded companies, the stock market has moved in one direction... up.

This indicates that fewer and fewer companies are driving the big indexes. And those that do are established names like Amazon, Apple, Exxon Mobil, Facebook and Google.

They're the big dogs. Yet many investors consider them overvalued and believe their explosive growth is behind them.

But that's not always the case...

If you - like many investors - have been sitting on the sidelines, thinking this market and the companies that control it are overvalued, then you've been missing out on quadruple-digit gains...

And you'll continue to do so unless you adopt a "rifle" approach.

If you've ever been to the shooting range, you know that a rifle is highly accurate at long distances (300-plus yards, in some cases).

On the other hand, although a shotgun will cause a lot of damage, it's less accurate and limited by a 75- to 100-yard range.

This is not the time for a shotgun approach to investing...

It's time to get out the rifle.

Instead of blanketing certain sectors or indexes, you should be targeting companies with solid fundamentals, strong leadership and sound reputations. And you should especially look for companies on the verge of experiencing a major catalyst.

Most investors know to look for share price movement following earnings calls, FDA approvals, mergers, acquisitions and institutional buying. Those can happen several times throughout a company's life cycle.

But there's often a one-time catalyst that produces even bigger jumps in share price. And it provides safer gains than a company's IPO.

My trusted colleague and friend Chief Income Strategist Marc Lichtenfeld calls it an "Ignition Event."

According to Kiplinger's, this event "generally means a company is going gangbusters."

In fact, this one-time-ONLY event is responsible for some of the fastest and largest returns in history...

1,814% on Hyatt Hotels in six months...

2,340% on Ruth's Hospitality in just seven months...

4,257% on Big Lots in five months...

4,891% on Ferrari in 16 months...

And these are all mature companies.

So if you think there's no room for this market to run... you might want to reconsider.

And it certainly doesn't matter that there are fewer public companies... as long as you know where to aim.

During a free, live webinar on May 23 - called the "Ignition Event Summit" - Marc will reveal details on five companies on the verge of experiencing their one-time Ignition Events.

He believes so strongly in the power of Ignition Events that he's guaranteeing you could make six figures in the next 12 months by following this strategy.

It's a bold promise. But based on the research I've seen - and Marc's track record - he'll deliver.

Reserve your spot today for the free, live Ignition Event Summit on May 23. But hurry, seats are filling up fast.

You won't want to miss it. I'll be tuning in next week from a cruise ship somewhere in the Mediterranean.

Click here for all the details.

Good investing,

Alex

Oneok Outperforming

Want to preview another one of Marc's recommendations? While Oneok (NYSE: OKE) doesn't represent a firm with a potential "Ignition Event" on the horizon, it's a solid play he recently added to The Oxford Income Letter's Instant Income Portfolio.

Here's what he said about it just last week...

In February, I recommended natural gas pipeline operator Oneok (NYSE: OKE) in The Oxford Income Letter.

The rebound in energy is one of the reasons Oneok is strongly outperforming the market. The stock is up 14% in the three months it's been in our portfolio versus a 1% decline in the S&P 500.

Earlier this month, Oneok reported solid first quarter results.

The company earned $0.64 per share, $0.03 better than Wall Street expected. Additionally, it maintained its guidance for the full year.

Though it operates as a regular corporation, it also reports distributable cash flow (DCF), as MLPs do, since its business is so similar.

In the first quarter, DCF was $437 million, up 33% over last year's. It paid out $316 million in dividends, so it has plenty of cash to continue to pay and raise the dividend.

And in fact, it did so last month.

In April, Oneok hiked the dividend 3.5% over the prior quarter's and 29% since June.

The new dividend is $0.795 quarterly or $3.18 annually. That gives us a yield of 5.6% on our entry price and 4.9% on the current price.

In the February issue, I included a chart showing Oneok's impressive history of dividend increases. I included my $3.08 per share dividend estimate for 2018. Below is the updated chart with the 2018 estimate as $3.18 and my new estimate for 2019.

I expect double-digit gains in the dividend over the coming years as Oneok adds more pipelines and sees increased demand for natural gas.


When I first recommended the stock in February, I suggested putting it in a tax-deferred account. In the fourth quarter of 2017, 22% of the dividend was considered a return of capital. That portion of the dividend is not taxed and instead lowers your cost basis.

However, in 2018, return of capital makes up more than 90% of the first two dividends declared.

I spoke with the company last Thursday. Though they couldn't give me a specific number, management expects return of capital to continue to be a very significant portion of the dividend for at least the next several years.

As a result, investors are better off keeping Oneok in a taxable account. Investors who are able to keep Oneok in a taxable account will enjoy mostly tax-deferred dividends.

As a reminder, when a company's dividend has return of capital, it is not taxed in the year the dividend is received. Rather, it lowers the cost basis and you'll pay the tax as capital gains when you sell the stock.

The stock remains a "Buy." It has a strong and growing dividend, and the price should continue to climb along with the rebound in energy.

- Donna DiVenuto-Ball with Marc Lichtenfeld

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