by Michael Tarsala
In addition to the usual -- the economy, market sentiment and upcoming earnings -- there's an array of potential bailouts and stimulus packages that will have a bearing on market direction.
What is your edge?
And is there a stock pick that demonstrates it?
Here's what he had to say:
My model has flexibility. It's true, we really don't know for sure which way this market is going. I always tell people, you have to be looking at what could go wrong with your thesis. You absolutely have to be ready to deal with that.
Part of my flexibility right now is that almost everything in the portfolio has a beta of under 1, which helps to lower volatility. And meanwhile, a lot of my stocks are paying me a nice, steady dividend to wait things out.
So here's a stock pick that really shows you what I'm talking about. It's Universal HealthRealty Income Trust (UHT).
Now I know, REITs have been pretty unpopular. But this on is what you think it is: It's a REIT looking at medical healthcare facilities.
On a year-to-date basis, the chart is almost perfectly flat.
And its beta is only 0.62, so there's a fractional amount of volatility to the overall market.
Why would I own this in the model?
Because it also has a 6.32% dividend yield.
This stock explains where I am hoping to be right now in the markets.
I think we have a lot of noise to look forward to in coming months, including our own U.S. election and a potential fiscal cliff coming at the end of the year.
So I am very happy sitting tight and collecting dividend yields.
If there is some upside surprise, one way we will deal with that is to close out the short we have in high-yield bonds, through the JNK ETF. And if the markets show real potential to run again, we'd reverse that and go long. We've found that junk bonds tend to run very early in recoveries.
Bill DeShurko is currently long UHT in his Dividend and Income Plus portfolio.