Buy These 3 High-Yield Stocks Raising Dividends in October

I always look forward to the start of a new calendar quarter. Within a few weeks stocks with policies of quarterly dividend increases will start to declare the next dividend rates. It is an interesting market effect that the investing public doesn’t take into account that some companies grow dividends every quarter. The market acts surprised every time it happens. Investors can get ahead of the share price gains by getting in before the dividend announcements.

The best places to find stocks with quarterly dividend increases and current great yields are energy infrastructure stocks and the renewable energy providers. These companies have long term contracts often with built in rate escalators, providing steady income streams. They generate growth by developing or acquiring new assets, each with its own long term service contract. These assets range from interstate energy pipelines, to natural gas liquids processing facilities to wind or solar energy projects.

For the best long term investment results, you want companies that have histories of dividend growth and a solid plan to continue that growth. Look for a balance of current yield and the annual dividend growth prospects. Here are three stocks that fit these criteria.

Clearway Energy (NYSE: CWEN) is the former NRG Yield Inc. (NYSE: NYLD) with a new name and a new sponsor. The Yieldco owns a nationally diverse portfolio of conventional, solar, thermal, wind, and natural gas electricity production assets.

The company was spun out in 2012 by NRG Energy (NYSE: NRG), a regulated electric utility company. Renewable energy assets developed by NRG were sold to NYLD to support the growth of NYLD. Recently the controlling sponsor interest in NYLD was acquired by Global Infrastructure Partners. Along with control of NYLD, Global Infrastructure purchased NRG Renewables 6.4 GW project backlog. Management guidance is for 5% to 8% annual dividend growth.

The company’s history is to increase the dividend each quarter. The next dividend should be announced around November 1.

The shares currently yield 6.3%.

ONEOK, Inc. (NYSE: OKE) provides natural gas transport and processing services in and from the major energy production basins. It owns and operates one of the nation’s premier natural gas liquids (NGL) systems and is a leader in the gathering, processing, storage and transportation of natural gas.

ONEOK’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. Since merging with its controlled MLP, ONEOK Partners in June 2016, the company has been increasing its dividend by about 3.5% each quarter.

The next dividend will be announced in the last week of October.

The shares currently yield 4.9%.

Magellan Midstream Partners LP (NYSE: MMP) is a pipeline focused MLP. The company is primarily a refined energy products (gasoline and other fuels) pipeline company. This sector generates 54% of net operating income. Crude oil pipelines bring in 38% of NOI and the balance of 8% is from marine energy product storage terminals.

Magellan Midstream is a large cap, investment grade, growth focused energy midstream company. It has increased the distribution paid to investors every year since 2001. Currently management forecasts future dividend growth of 5% to 8% per year.

The next distribution will be announced on about October 20.

MMP currently yields 5.6%.

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Market Preview: Strong Employment Numbers Add Fuel

Flagging financial stocks rallied Wednesday providing enough fuel for the market to power higher once again. Taking a cue from the highest ISM non-manufacturing index numbers since 1997, markets rallied out of the gate and held onto fleeting gains into Wednesday’s close. The ISM numbers, combined with strong employment numbers also released Wednesday morning, forced trade tariff worries to the back burner. If financials can truly turn here, as many have been expecting for several months, citing rising interest rates, they may become the new flag bearer for the bull market. But, they’ll need more than one day of positive price action to pull investors to their banner.

Constellation Brands (STZ) reports earnings Thursday morning. The company known for its beverage products, recently upped its stake in Canopy Growth, a Canadian based medical cannabis company, by $4 billion. Investors will be looking for an update on how Constellation intends to integrate Canopy’s products with its brands, and what the timetable looks like. Also reporting earnings on Thursday is Costco (COST). The bulk item retailer is up nicely in 2018, and now sports a fairly rich PE of 36. Analysts are looking for sales and earnings growth to come in strong, but the more important number to focus on may be margins. If the membership company can show margins are moving in a positive trend, the stock could finish out 2018 on a strong note.

Given Wednesday’s data, scheduled Thursday and Friday economic numbers may support positive market action headed into the weekend. Both days are clearly focused on a discussion of jobs. Thursday we’ll see the Challenger Job Cuts Report along with jobless claims, and factory orders numbers. And then Friday brings the release of the employment situation numbers, which includes the unemployment rate, as well as nonfarm and private employment numbers. The unemployment rate is expected to drop again to 3.8%. Average hourly earnings are expected to tick up only .3%. Strong employment numbers could provide a base for the market to catapult into a strong fourth quarter.

Joining the earnings hit parade on Thursday is International Speedway Corporation (ISCA). Given the widely reported decline in the NASCAR fan base, most investors would probably be surprised to learn the stock is actually up over 17% so far in 2018. This may be a case of bad news already being baked into the stock price last year. Analysts don’t expect much out of the racing stadium owner on Thursday, and will mainly be looking for any signs of a stabilization of the fan base. No earnings are currently scheduled for Friday.

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Energy Stocks Adopting New Technologies

Even as technology invades other areas of industry, there has been one notable laggard in adopting new technologies – the energy industry.

Even the mining industry is using robots to automate many of the functions at mines, but autonomous robots are still a rarity in the oil and gas industry (more on that later). So it is major news that Royal Dutch Shell PLC (NYSE: RDS.A and RDS.B) is investing in an artificial intelligence (AI) platform to support operations across the entire group.

Shell and AI

The company providing the AI platform for Shell is C3IOT on Microsoft Azure. The main initial application of AI at Shell will be for predictive maintenance – such as working out when a piece of equipment is likely to fail, so it can be replaced before it breaks. The company says that more than 600,000 assets from individual pieces of equipment to entire wells will be covered by the predictive maintenance program.

The long-term goal though is to expand the AI platform to support other machine learning, machine vision, and natural language processing (NLP)-based uses in all of Shell’s operations – upstream, downstream, unconventional fuels, refining, and retail operations.

Jay Crotts, Shell Group CIO said “With the C3 IoT Platform, we’re looking forward to significantly enhancing the productivity and scope of our advanced analytics capabilities to create greater economic value across Shell’s operations. C3 IoT allows us to optimize our existing investments in data and cloud infrastructure while accelerating time to value of AI-based applications, so Shell can better serve our customers with even more agility and efficiency.”

I cannot emphasize enough that this is a really big deal in the artificial intelligence space. Tom Siebel, C3 IOT’s CEO, described the deal with Shell to the Financial Times as “the largest AI deployment that we’re aware of anywhere in the world.”

And he correctly suggested that the company had jumped ahead of its oil company peers. Siebel said to the Financial Times, “Everybody else is kind of looking at it. These guys are rolling it out.” Siebel predicts that the benefits for Shell will run into the billions of dollars per year!

And with evidence accumulating that the productivity gains from the shale revolution are slowing down, deploying AI could be the way the oil and gas industry takes its next leap forward.

The slowing of productivity gains from the U.S. shale revolution was emphasized recently by the CEO of Schlumberger, Paal Kinsgaard, who said that the advantages of drilling longer laterals and pumping more sand and water to increase oil production was nearing an end. He pointed to the specific example of the Eagle Ford in Texas where unit well performance is declining.

What the IEA Says

The adoption of AI by companies like Shell is just the tip of the proverbial iceberg when it comes to the potential of technology to transform the industry. The International Energy Agency (IEA) recently gave further examples of how how new technologies can boost the oil and gas industry.

One such example is the use of miniaturized sensors and fiber optic sensors that could be used to boost output or increase the overall recovery of oil and gas from a reservoir. Other examples are the use of automated drilling rigs and robots to inspect and repair subsea infrastructure and to monitor transmission pipelines and tanks.

Drones could also be used to inspect pipelines (which are often spread over many miles) and hard-to-reach equipment such as flare stacks and remote, unmanned offshore facilities. Drones with potent “sniffers” can detect methane leaks coming from oil and gas pipelines at 1,000 times the accuracy of traditional methods, saving pipeline owners significant money that is lost from leaked product and potentially from fines.

In the longer term, the IEA says the potential exists to improve the analysis and processing speed of data, such as the large, unstructured datasets generated by seismic studies. The oil and gas industry will furthermore see more wearables, robotics, and the application of AI in their field operations.

The IEA forecast that widespread use of digital technologies could decrease production costs between 10% and 20%, including through advanced processing of seismic data, the use of sensors, and enhanced reservoir modeling. Technically recoverable oil and gas resources could be boosted by around 5% globally, with the greatest gains expected in shale gas.

European Oils Lead

As you saw earlier, Shell is leading the way when it comes to the adoption of AI among the oil majors. Another European oil major, Total SA (NYSE: TOT), is leading in another segment of technology adoption – autonomous robots.

In a first for the oil industry, an autonomous robot will be deployed to an offshore oil and gas platform in the North Sea later this year. Under this pilot project, the robot will initially be deployed at the French oil firm Total’s gas plant on Shetland before being sent to join Total’s 120 workers on the company’s Alwyn platform, 440 kilometers north-east of Aberdeen, Scotland. The machine, made by Austrian firm Taurob and supported on the software side by German university TU Darmstadt, will be used for visual inspections and detecting gas leaks.

The Total trial will start with just this one robot to see how it handles the harsh conditions in the North Sea, as well as how well it works alongside people. If successful, you could see numerous such robots on offshore platforms across the world within five years, transforming the offshore oil industry.

Like many other industries, technology will eventually transform even the staid oil and gas industry. But as we have seen with other industries, the companies that fail to adopt new technologies will wither and die. The winners will be those companies not afraid of technological change.

In the case of the major oil and gas companies right now, the winners look to be the European companies – Shell (up 14% over the past year) and Total (up 22% over the past year). Both look to be good investments, especially with nice current yields of 5.5% and 4.6% respectively.

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Here’s How Much Amazon Stock Is Actually Worth

In October 2013, Money Morning Defense and Tech Specialist Michael A. Robinson predicted that Amazon.com Inc. (NASDAQ: AMZN) was destined to hit $1,000 per share.

According to Michael, his bold price prediction “had to do with [his] thesis that high tech is vital to our economy and your investment portfolio… the road to wealth is paved by tech.”

amazon stockFive years later, little has changed for Michael and his belief in Amazon stock.

Except for the price of Amazon’s stock. Since Michael’s prediction, AMZN stock has entered the stratosphere, climbing 452% over the last five years. At the time of writing, the company’s stock is only $4 away from breaking the $2,000 barrier.

Amazon’s astonishing rise has exceeded Michael’s expectations – and has driven him to make another astonishing price call for this tech juggernaut…

Don’t Let Media Predictions Cloud Your Judgement Again    

When Amazon crossed the $1,000 market on May 31, 2017, TV host Jim Cramer issued a dire warning for Amazon investors.

According to Cramer, the $1,000 mark was a psychological barrier for investors, one that would likely result in the end of the company’s “bubble.”

As we know now, the host of “Mad Money” could not have been more off the mark. Amazon stock has nearly doubled since the stock blew through the $1,000 mark 18 months ago.

Michael often refers to Cramer’s price call as a “cautionary broadcast” – one that investors should have taken with a big grain of salt.

Michael doesn’t like to brag, but he nailed his last Amazon price prediction thanks to his 34 years of experience in Silicon Valley and a proven track record of identifying the market’s next big tech winners.

As Michael points out, much of media has been thrown off of Amazon because of fears of a tech bubble. But they couldn’t be further from the truth. Michael has long argued that “tech has become the key driver for the U.S. economy in a way we haven’t seen before.”

That’s why he’s issued a new Amazon price prediction – one that’s even bolder than the last one…

Amazon’s Next Stop: $3,000

Michael can easily justify a $3,000 share price based solely on Amazon’s massive growth rates.

For the past three years, Amazon has grown its earnings per share by roughly 99%. Just to be conservative, he cut that figure way back to 25% to make his estimate.

At that rate, the firm’s per-share earnings would double every 2.8 years. Because stock prices tend to follow earnings growth, Michael reasons the stock has the potential to double in less than five years.

That’s why this new “bold call” on Amazon stock could turn out to be conservative.

But the company’s amazing growth rates aren’t the only vital details here.

There’s something deeper.

And it’s the reason for all the upside in the first place.

Amazon now operates as essentially two different companies – and there will soon be a third.

It’s long been the king of e-commerce, and in the past few years, it’s become the clear leader in cloud computing services.

Amazon Web Services (AWS) is a profit machine. In the most recent quarter, AWS sales climbed 48.9% to $6.1 billion.

Over the past three years, AWS sales have risen 255%. The cloud services unit now accounts for 55% of Amazon’s operating income, which came in at $1.64 billion, beating forecasts.

Not bad for a “company” that only began in 2006.

However, the company’s next move is likely to give it a dominant hand in every retail area it sets foot in.

After purchasing Whole Foods Market last year, Amazon has launched a full-fledged invasion of the “brick and mortar” retail space, promising to revolutionize storefronts in the same way it changed Internet commerce.

Taken together, these three areas make Amazon a triple threat – one that promises to generate immense profits for shareholders long into the future.

However, this isn’t Michael’s only bold call…

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Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
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Source: Money Morning 

 

17 Small-Cap Stocks That Could Double

Small-cap stocks can be fertile ground for individual investors. Large-cap stocks tend to get the most coverage, but in small caps, investors can find an edge.

A lot of funds are simply too large to bother with stocks under a current market capitalization. The ‘story’ behind a smaller stock can be hidden, particularly with less media and Wall Street coverage. And volatility generally is higher — which sometimes moves a small-cap stock without any material news.

These 17 small-cap stocks all like hidden gems — possibly. To some degree, all 17 are high-risk stocks. But that’s usually the case with smaller companies. For these 17 small caps, the risks seem worth taking because all of them have a chance to double — and maybe quickly if all works out according to plan.

Smart & Final (SFS)

I recommended West Coast grocer Smart & Final (NYSE:SFS) last year as one of 10 2017 losers to buy in 2018. SFS went on to bounce nicely — but it’s given back those gains and then some, touching an all-time low in June before recovering over the past few months.

SFS has pulled back sharply over the past few sessions. But I’m not ready to give up on the small-cap stock just yet. There is still a case for big upside here. Comparable sales aren’t bad in a still deflationary environment, rising 1.3% in the first half of the year. Bears have pointed to competition from German retailer Aldi in the company’s core California markets as a major risk, but Smart & Final seems to be holding its own.

Meanwhile, the company’s Smart Foodservice Warehouse division serves mostly restaurants and commercial customers. This division continues to grow nicely. If S&F can get the supermarket business stabilized, and continue to grow the foodservice business through both same-store sales and new stores, there’s room for faster sales growth and margin expansion. At ~7x EBITDA and 13x forward EPS, that kind of growth simply isn’t priced in. And a reasonably leveraged balance sheet can magnify the gains in SFS stock.

Obviously, there are risks here. The grocery space is tough and getting tougher, and Aldi (which also owns Trader Joe’s), Albertsons, and Kroger (NYSE:KR) all provide tough competition. But for investors who see the pressure in the sector as overdone, SFS looks like the highest-reward play at the moment.

Overstock.com (OSTK)

ostk stock

Source: Shutterstock

On the surface, Overstock.com (NASDAQ:OSTK) simply looks like another one of the small-cap stocks that benefited from a cryptocurrency bubble and has come back down to Earth. OSTK traded below $20 last summer; by early January it had touched $90. The stock since has lost about 70% of its value as optimism toward its tZERO ICO platform has waned.

The pullback makes some sense. Q4 earnings in March were a big hit to the bull case, as I wrote at the time. Cryptocurrencies have dropped. The legacy e-commerce business continues to struggle with profitability. Recent weakness in SEO (search engine optimization) has added to the losses, and CEO Patrick Byrne said the company would focus on minimizing cash burn in the second half of the year after investments in the first two quarters.

Still, there’s an intriguing high-risk, high-reward case here. A private equity firm is investing in the company at $33 per OSTK share — a 20% premium to the current price. It’s also buying a stake in tZERO at a $1.5 billion valuation — more than double that of OSTK as a whole.

The gains to $90 obviously were too much; the pullback to $26 may be the same.

CryoLife (CRY)

Source: Shutterstock

CryoLife (NYSE:CRY) already has doubled since February, and isn’t cheap. CRY stock trades at more than 5x 2018 revenue guidance, and over 100x its EPS target for the year.

But there’s a solid long-term case here for CryoLife, which manufactures medical devices and distributes implantable tissues used in heart and vascular surgery. Growth continues to be impressive. Margins are relatively thin but should expand as operating expenses are leveraged going forward. Plus, a $1.3 billion market cap makes CRY a potential M&A target down the line and gives the company capital to do more acquisitions like last year’s buyout of Germany’s JOTEC.

Again, this isn’t one of the cheap small-cap stocks, and it may be that the market is on to the story here. But medtech plays can grow for a long time — and if CryoLife keeps on its current path, it could double once again.

Gilat Satellite Networks (GILT)

Source: Shutterstock

Gilat Satellite Networks (NASDAQ:GILT) has pretty much been a graveyard for investor capital. GILT stock soared during the dot-com bubble… and flirted with bankruptcy just a couple of years later. From 2008 to 2017, the small-cap stock simply couldn’t break $6 per share.

But GILT has shown some signs of life of late, touching a ten-year high earlier this month. And there could be more upside ahead. Expanding needs for rural broadband should drive demand; Gilat already has deals with the governments of Peru and Colombia that have totaled around $400 million. Gilat satellites provide backhaul for T-Mobile (NASDAQ:TMUS) and connectivity for airline Wi-Fi provider Gogo (NASDAQ:GOGO). Demand on both fronts should continue to rise going forward.

GILT isn’t necessarily cheap at about 18x EBITDA and 30x+ likely 2018 EPS. But the balance sheet is clean, the assets have real value and satellite communications could play a bigger role in the 5G rollout. With fellow satellite play Intelsat (NYSE:I) up nearly 700% this year (albeit on spectrum value), GILT could see some spillover — and a nice run of its own.

Beazer Homes (BZH), William Lyon Homes (WLH), and M/I Homes (MHO)

Source: Shutterstock

Homebuilder stocks actually have had a terrible 2018 — which might be a surprise to investors. The economy is booming, the stock market is near record highs, and consumer confidence is up. Interest rates have risen, but still remain low by historical standards.

And yet Beazer Homes (NYSE:BZH), William Lyon Homes (NYSE:WLH) and M/I Homes(NYSE:MHO) have had a miserable 2018. BZH stock has dropped 47%, and WLH 48%. MHO is off 32%.

The path to a double for each of these stocks is clear. A change in sentiment toward the sector on its own will drive huge upside. All three stocks trade in the range of 5x forward earnings. And BZH, in particular, seems like a potential acquisition target. With Lennar (NYSE:LENacquiringCalAtlantic, and AV Homes (NASDAQ:AVHI) selling to Taylor Morrison (NYSE:TMHC), clearly there are buyers in the sector.

Each of the three small-cap stocks has a different bull case — but the broad point here holds. For investors who see another leg up in the economy, and further strength in the housing market, small-cap homebuilders are a very attractive group.

Arlo Technologies (ARLO)

Source: Brad Moon

IP camera manufacturer Arlo Technologies (NYSE:ARLO) has struggled since shares were spun off by NETGEAR (NASDAQ:NTGR). The IPO priced below its initial range. ARLO stock then rallied, but has fallen steadily over the past few sessions, falling over 40% in just the last month.

The catalyst appears to be the new line of Echo devices from Amazon. The big fear for Arlo, despite solid growth, has been that its hardware would eventually be overrun by offerings from the likes of Amazon and Alphabet’s (NASDAQ:GOOGL,GOOG) Google.

But Arlo already has a huge head start and leading market share in cameras and is rolling out its own additional devices as well. Neither Amazon nor Google has proven to be all that successful in hardware. (Remember the Fire Phone?) As such, those fears look overwrought. Analysts seem to think that’s the case — the average price target for ARLO suggests more than 100% upside.

And if Arlo can perform well, particularly in the key holiday season, it can dispel those competitive fears. That would lead to big upside for ARLO — and for NTGR, which still owns 85% of the company ahead of a complete spinoff next year.

AK Steel (AKS)

I’m actually not all that optimistic toward AK Steel (NYSE:AKS). I wrote back in February that investors had better options in the steel space — and I still think that’s the case.

AKS is a high-risk stock, without question. A brief rally in late July was undercut by a disappointing Q2 earnings report. Execution hasn’t been great. Prices should be helping earnings — and are to some extent — but execution hasn’t been spectacular. AKS still has a heavy debt load and pension liabilities on top of its borrowings.

Still, as far as high-risk stocks go, AKS is intriguing. The benefits of U.S. steel tariffs on pricing have been offset by capacity increases in the industry, but pricing should rise going forward. The Street has actually supported the stock of late, with Morgan Stanley (NYSE:MSamong the firms turning bullish.

It’s not inconceivable that AK Steel could go bankrupt at some point down the line. But if this works, it likely works big. If pricing boosts margins, the company can quickly deleverage. That both de-risks the stock and gives equity holders a larger share of the business’s value — which can lead to big gains for AKS stock.

This is a high-risk, high-reward play, and while I personally am not ready to take the risk, more aggressive investors might disagree.

Potbelly (PBPB)

Source: Flickr

Potbelly (NASDAQ:PBPB) likely seems a very odd choice for this list. PBPB stock has been one of the most stagnant stocks in the market. For the last four years, PBPB has traded between $10 and $15 save for two very brief dips (one each in 2014 and 2015).

But if PBPB can break out of that range, the upside can be huge. Potbelly still has relatively thin margins, with EBITDA at about 9% of sales through the first half of 2018. Same-store sales have been weak — they’re negative so far this year — but turning the top line positive will expand margins. An EBITDA multiple now under 8x will rise, and PBPB has a path toward big upside.

A similar story has played out of late with other chains. Noodles & Company (NASDAQ:NDLS) has nearly tripled over the past year. BJ’s Restaurants (NASDAQ:BJRI) has almost doubled YTD. Chipotle Mexican Grill (NYSE:CMG) has risen 90% from its lows. If Potbelly can find a way to jumpstart same-restaurant sales, it could be the next stock in the sector to soar.

Verastem (VSTM)

opko stock

Source: Shutterstock

There’s no sector with greater rewards, and greater risk, than biotechnology. FDA approval can send a stock soaring 100%+ in a single session. A clinical trial failure can wipe out a stock. This is particularly true when it comes to small-cap stocks in the sector. Indeed, GTx, Inc.(NASDAQ:GTXI) lost 92% of its value in a single session just last week after phase 2 results.

Verastem (NASDAQ:VSTM) already has seen both sides of the biotech coin. The stock has risen 140% so far this year on the back of optimism toward lymphoma treatment duvelisib. But when the drug actually received FDA approval this week, VSTM shares fell 20%.

The catalyst appears to be a so-called “black box” warning which highlights toxicity in the drug. That raises concerns about insurance coverage — and the amount of cash Verastem will need to spend to get the drug in front of oncologists.

But even with the black box warning, and this week’s selloff, there’s room for upside here. The average of 7 analyst target prices is $15+, a clear double from current levels below $8. Verastem could become an acquisition target as larger drug companies target the cancer treatment space. New agreements in China and Japan offer international potential as the company works to reach profitability.

Again, this is a high-risk play in a high-risk sector. But the hurdle of drug approval cleared, VSTM could move higher going forward.

Aclaris Therapeutics (ACRS)

Remoxy's Rejection Drives PTIE Stock 70% Lower

Source: Shutterstock

Aclaris Therapeutics (NASDAQ:ACRS) is another biotech play — albeit a very different one from Verastem. Aclaris’ pipeline of drugs target skin conditions including raised seborrheic keratosis (a non-malignant skin tumor), alopecia, and common warts.

Despite success with the FDA — including a fast-track designation for its alopecia prospect — ACRS stock continues to move in the wrong direction. Shares have fallen 39% so far this year.

But here, too, analysts are optimistic, with an average price target of $42 suggesting 175% upside. The diversified pipeline should minimize risk as well.

Like most early-stage drug development companies, Aclaris is unprofitable, and dilution through an equity offering is a near- to mid-term risk. But it looks like investors have run out of patience with this small cap stock — perhaps sooner than they should have.

Photronics (PLAB)

Source: Shutterstock

Photronics (NASDAQ:PLAB) has an extremely intriguing story at the moment, one reason I own the stock. Photronics manufactures photomasks used in the production of both integrated circuits and flat panel display chips.

It’s a tough business. So-called ‘captive’ (or in-house) operations from companies like Intel(NASDAQ:INTC) and Samsung have taken substantial market share over the past few years. Intensive capital expenditures are required to keep up to date with customer needs. PLAB has traded mostly sideways for years now, with disappointing results the last two fiscal years before better numbers of late led to a modest rally.

But it’s the long-term story here that’s truly intriguing. Increasing adoption of AMOLED displays should help the company’s flat-panel business. Its IC offerings should benefit from automotive chip content and IoT (Internet of Things). And Photronics is investing some $320 million into two new facilities in China — which hopefully will make it the dominant photomask provider to that country’s growing semiconductor industry.

At the moment, the market isn’t thrilled about either chips or China. Semiconductor stocks have pulled back, and Chinese stocks remain weak. But Photronics’ opportunity will take a few years to fully play out, and at some point, the concerns about its sector and its new market will pass. Once that happens, I’m betting PLAB is one of the small-cap stocks that will soar.

Camping World Holdings (CWH)

Source: Shutterstock

For shares of Camping World Holdings (NYSE:CWH) to double, all they have to do is get back to where they traded in January. The provider and retailer of recreational vehicles and outdoor products has seen its stock fall by more than half so far in 2018.

There are some reasons for the pullback. Q2 earnings last month were somewhat disappointing. The RV market on the whole looks potentially oversupplied. The same cyclical fears keeping homebuilders down likely are pressuring stocks of RV manufacturers like Winnebago Industries(NYSE:WGO) and Thor Industries (NYSE:THO) as well.

But Camping World still has some levers to pull. It’s still integrating last year’s acquisition of Gander Mountain assets from bankruptcy, a deal which has notably expanded its footprint — and its reach into the red-hot boating sector. More RV dealerships will be opened going forward.

And in the meantime, the company’s Good Sam loyalty program remains a hugely valuable asset, generating $100 million in annual EBITDA alone. Millennials are showing interest in the RV category (albeit on the smaller, cheaper end) and demand from retiring baby boomers hasn’t ended just yet. There’s still a lot to like in the business — and at 7x forward EPS, a lot to like in the price of this small cap.

GMS (GMS)

Wallboard and building products distributor GMS (NYSE:GMS) is another small-cap stock that has been hit by cyclical fears. Shares are down 37% so far this year, and threatening to return to their late 2016 IPO levels just above $20.

But the core story here really hasn’t changed.

GMS continues to roll up smaller distributors. It closed a major acquisition of WSB Titan earlier this year that dramatically increased its business.

The wallboard business, in particular, should have some protection from big-box retailers like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW). The product is simply too big — and too cheap on a per-pound basis- – for customers to fight aggressively on price.

There have been some concerns starting late last year on the gross margin front, and a leveraged balance sheet means GMS isn’t quite as cheap as a 6x+ forward EPS multiple might suggest. But the market liked the story here less than a year ago, and it liked the Titan deal at the time it was announced (GMS shares rose 10% on the news). When investors change their mind again, GMS’ larger earnings base and the balance sheet leverage makes this one of the small-cap stocks for which a double within 12-18 months is a distinct possibility.

Extreme Networks (EXTR)

Source: Shutterstock

Investors need to be very careful with enterprise networking vendor Extreme Networks(NASDAQ:EXTR). Very, very careful. EXTR stock has moved steadily downward over the past several months. Three consecutive post-earnings declines were capped off by a 33% drop following the Q4 report last month. Acquisitions of assets from Avaya (NYSE:AVYA), Brocade(now a unit of Broadcom (NASDAQ:AVGO)) and Zebra Technologies (NASDAQ:ZBRA) were supposed to make Extreme an end-to-end networking provider. The strategy hasn’t worked — but the deals have added debt to the company’s balance sheet.

Still, there’s hope for a turnaround here. Investors liked the strategy early on, before the recent missteps. Management has insisted that timing issues have played a part, notably in pulling down expectations for the data center business heading into fiscal 2019. The balance sheet actually is in decent shape, and Extreme remains solidly profitable.

If the company can stem the bleeding, and change the perception of its M&A strategy, there’s room for a very quick and steep rebound. EXTR already is down 65% from its 52-week high. Those look like big ‘ifs’ at the moment, however, and investors might want to wait for some signs of improvements before getting too aggressive with the small-cap stock.

The Simply Good Foods Company (SMPL)

Source: Shutterstock

The Simply Good Foods Company (NASDAQ:SMPL) already has had a nice run over the past few months, climbing from $13 to nearly $19. But this is one of the small-cap stocks that may have more upside ahead.

The maker of healthy snacks under the Atkins and Simply Protein brands is growing in a grocery space that continues to struggle. Revenue has risen 8% so far this fiscal year, with Adjusted EBITDA up nearly 10%. And there’s room for that growth to continue.

Meanwhile, SMPL likely will look to more acquisitions to build out its portfolio — and potentially become an acquisition target itself down the line. Mondelez International (NASDAQ:MDLZ) could be a buyer. Campbell Soup (NYSE:CPBacquired Snyder’s-Lance, and another larger CPB play could take a look at SMPL. With the stock still trading under 20x EBITDA, more growth and an eventual sale could lead SMPL to big gains over the next few years.

As of this writing, Vince Martin is long shares of NETGEAR and Photronics. He has no positions in any other securities mentioned.

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Source: Investor Place

7 Stocks to Buy Thanks to Trump’s New Trade Deal

Source: Shutterstock

U.S. equities are moving powerfully higher on Monday, with the major large-cap indices testing recent record highs, after the United States reached a new trade deal with Mexico and Canada. Effectively “NAFTA 2.0”, the deal, which carries the moniker USMCA, will solve deficiencies in the original NAFTA deal and open new markets for U.S. farmers and manufacturers … at least according to President Trump.

Stocks are cheering the news, as it’s one of the first indications Trump’s aggressive trade tactics are starting to produce results instead of just escalation, as in the case with the ongoing tensions with China.

Investors are cheering the removal of a major source of policy uncertainty and are raising their hopes that previously imposed steel and aluminum tariffs will be rolled back to the benefit of manufacturers. As a result, a number of large-cap names are pushing to new highs. With that in mind, here are seven stocks to buy now:

Microsoft (MSFT)

Microsoft (MSFT) stocks to buy

Microsoft (NASDAQ:MSFT) shares are breaking out to a new record high, pushing away from the $115-a-share level and continuing a smooth and steady rise above their 50-day moving average going back to early April. The company has been enjoying a lift thanks to a dividend boost announced in late September, which included a rise from 42 cents per share to 46 cents per share. While this stock to buy isn’t directly impacted by the trade news, it’s enjoying the broad market tailwinds.

The company will next report results on Oct. 25. Analysts are looking for earnings of 96 cents per share on revenues of $27.7 billion. When the company last reported on July 19, earnings of $1.14 per share beat estimates by 6 cents on a 17.5% rise in revenues.

Caterpillar (CAT)

Caterpillar (CAT) stocks to buy

Heavy equipment manufacturer Caterpillar (NYSE:CAT) is at the epicenter of the ongoing trade disputes, as it is sensitive to both U.S. export activity as well as the price of steel and aluminum used to build its earthmovers and other machinery. Shares recently popped up and over their 200-day moving average, returning to a trading range last seen in June. Shares are also overcoming the negative impact of a downgrade from analysts at OTR Global on Sept. 21.

The company will next report results on Oct. 23, before the bell. Analysts are looking for earnings of $2.82 per share on revenues of $13.2 billion. When the company last reported on July 30, earnings of $2.97 cents per share beat estimates by 23 cents on a 23.7% rise in revenues.

Boeing (BA)

Boeing (BA) stocks to buy

Shares of Boeing (NYSE:BA) — one of America’s premier exporters, especially to China — are enjoying a 2.5% surge above triple-top resistance from February, and they are pushing to new record highs. This jump is coming after two tests of support at the 200-day moving average. The company’s order backlog continues to grow, as seen in BA’s announcement today of an order from United Airlines (NASDAQ:UAL) for nine 787 Dreamliners valued at $2.5 billion.

The company will next report results on Oct. 24, before the bell. Analysts are looking for earnings of $3.49 per share on revenues of $24.9 billion. When the company last reported on July 25, earnings of $3.33 per share beat estimates by 8 cents on a 5.2% rise in revenues.

Honeywell (HON)

Honeywell (HON) stocks to buy

Shares of Honeywell (NYSE:HON) are pushing to new highs, capping nearly a month-long consolidation range and resuming the uptrend that started in June. HON shares have experienced a total gain of nearly 20% so far. The company has many areas of exposure to trade and exports, acting as a supplier for BA and other aerospace companies as well as supplying products for home and building projects and advanced technologies like quantum computing.

The company will next report results on Oct. 19, before the bell. Analysts are looking for earnings of $1.99 per share on revenues of $10.7 billion. When the company last reported on July 20, earnings of $2.12 per share beat estimates by 11 cents on an 8.3% rise in revenues.

Danaher (DHR)

Danaher (DHR) stocks to buy

Danaher (NYSE:DHR) shares are extending their recent rise, pushing further away from the lows seen in late August for a move of roughly 10% so far. The company is a maker of medical and industrial products such as microscopes, filtration systems and purification solutions. The company has been a steady riser compared to some of the other companies on this list of stocks to buy, and it has risen without so much as a touch of its 200-week moving average since way back in 2010.

The company will next report results on Oct. 18, before the bell. Analysts are looking for earnings of $1.08 per share on revenues of $4.8 billion. When the company last reported on July 19, earnings of $1.15 per share beat estimates by 6 cents per share on a 10.4% rise in revenues.

Boston Scientific (BSX)

Boston Scientific (BSX) stocks to buy

Boston Scientific (NYSE:BSX) shares have been a steady gainers as well, extending a 50% rise off of their late March lows to push to new highs. Analysts at Needham raised their price target to $43 after the company announced an agreement to acquire Augmenix, a developer of a treatment to reduce side effects of men recovering from prostate cancer radiotherapy.

The company will next report results on Oct. 24, before the bell. Analysts are looking for earnings of 34 cents per share on revenues of $2.4 billion. When the company last reported on July 25, earnings of 41 cents per share beat estimates by 7 cents on a 10.3% rise in revenues.

Cisco (CSCO)

Cisco (CSCO) stocks to buy

Shares of Cisco (NASDAQ:CSCO) are inching up and over recent congestion between $48 and $49 a share. CSCO is benefiting from a price target upgrade from analysts at Piper Jaffray who are now looking for $53. The stock has been on the move since August when the company reported an acceleration of revenue growth pushing the share price to levels not seen since dot-com bubble.

The company will next report results on Nov. 14, after the close. Analysts are looking for earnings of 66 cents per share on revenues of $12.9 billion. When the company last reported on Aug. 15, earnings of 70 cents per share beat estimates by a penny on a 5.9% rise in revenues.

As of this writing, William Roth did not hold a position in any of the aforementioned securities.

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Gold Prices Are Following This Textbook Trend

The widely anticipated September Fed rate hike is now behind us.

And the market’s reaction, at least so far, has been right out of the textbook.

The dollar is up, and gold prices are down.

But we know what happens next…

Gold prices will start to rally.

The dollar is still showing signs of having peaked, and gold continues to suggest it’s building a base before rallying.

As it turns out, speculators have their biggest futures bets against gold in 17 years. The last time levels were similar was in 2001, and that’s when gold rallied by almost 300% in just over 24 months.

There’s no guarantee we’re at an interim bottom, but the signs are pointing toward those odds.

Let’s take a closer look at what happened to the price of gold last week, plus how the Fed is changing my latest gold price prediction

Fed Rate Hikes Are Good for Gold Prices

The first half of last week brought more gold consolidation with the yellow metal moving within a tight $9 range.

The gold price action was all at the back end of the week, which is no surprise, given participants were waiting for confirmation of the Fed rate hike.

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They got it.  As expected, gold prices dropped at the expense of the dollar’s gain.

Here’s what the U.S Dollar Index (DXY) did over the last five trading days…

gold

Little real gains came on Wednesday (Sept. 26) after the Fed hike and press release. Gold prices ended at $1,194, which was the bottom of its recent trading range.

But on Thursday (Sept. 27), the euro dropped, pushing the DXY higher as concern over a possible delay for Italy’s budget proposal weighed on the currency. The dollar soared, taking the DXY to 95.3 by mid-morning, a 130-basis-point gain from Tuesday’s (Sept. 25) low.

Gold prices were beaten down on Thursday in the wake of euro weakness and a somewhat hawkish outlook from the Fed that rate hikes would continue into 2020.

But traders took dollar profits on Friday (Sept. 28) as the rate hike euphoria wore off. That pushed the DXY back to 95.10 by mid-afternoon, and gold rallied by $10 from $1,183 to $1,193 through the late morning and into the close.

Now, the textbook response from here is to see the start of the next gold price rally.

Here’s why – and how high you can expect gold prices to climb to…

My October Gold Price Forecast

With Friday’s close, the dollar index is back up to 95, which is about the level of the 50-day moving average.

But notice that the 50-day moving average (the blue line below) has recently dipped lower, suggesting the trend has indeed shifted downward.

price of gold

As I had expected last week, we are getting a bounce in the DXY as it had approached oversold levels. But I still think weakness will soon return.

Tariffs and economic strength have boosted the greenback, but that’s only going to help for so long. As other nations wean themselves off pricey American imports, the United States will feel the impact. Trump adamantly wants a weaker dollar and talks it down at every opportunity to help favor U.S. exports.

Here are a few interesting charts for gold and gold stocks.

Given Friday’s bounce, which doesn’t show on this chart, we could be looking at a double bottom in gold prices if it holds.

gold price

As for gold stocks, they’ve shown more relative strength than gold itself.

gold price rally

More interesting is recent action in the Gold Miners Bullish Percent Index ($BPGDM).

gold price prediction

When the index turns up from oversold levels (typically below 30), we get a buy signal. If there is solid follow-through, we could be looking at strong gains in gold stocks over the next couple of months.

If we get a gold rally abetted by renewed dollar weakness, then look for gold to quickly cross the $1,210 level (50-day moving average). I’d then expect a push higher to the $1,230 to $1,240 range.

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Market Preview: Market Rallies on New USMCA Deal, Earnings from Pepsi and Paychex

The announcement that the U.S. and Canada had reached a trade agreement sent the DJIA and S&P 500 higher Monday. The new United States-Mexico-Canada Agreement or USMCA must be approved by Congress before it goes into effect. The rally in U.S. markets appeared to be more of a relief rally that there is finally some certainty on trade in North America than a celebration of the deal. Traders hope the closing of this deal portends a shorter trade war with China, and perhaps an agreement with the EU. But while announcing the new USMCA in the Rose Garden, President Trump threw cold water on restarting U.S./China talks by saying it was “too early to talk” trade with China at this point. The President presumably wants to give the new tariffs a chance to have an impact before reopening negotiations.

Pepsico (PEP) reports earnings Tuesday. The beverage and snack company has been losing ground in North America, and covering with gains internationally for several quarters. The recent announcement that the company would be acquiring SodaStream (SODA) my staunch some of the erosion in North America, but short term the acquisition will likely add integration costs. Paychex (PAYX) also reports earnings Tuesday morning. After hitting lows in April, the payroll company has risen almost 30%, but earnings estimates have been falling the last few months. As with many of the financial stocks, the company may be feeling the effect of competition from upstart FinTechs more nimble than the $26 billion giant.

In economic news, Tuesday morning the Redbook retail numbers will be released along with motor vehicle sales. Following close on the heels of the trade deal, and with GM no longer providing numbers for the report, the auto numbers may need to come with a user guide this time around. Fed Chairman Powell will deliver a speech at 12pm on Tuesday, but it’s highly likely no new information will come out of the talk given the recency of the Fed announcement last week. Wednesday MBA mortgage applications, the ADP Employment Report, services PMI, and the ISM Non-Manufacturing Index will all be released. Consensus puts the employment number at 179,000 jobs created in September.

Supplementing the mortgage application numbers Wednesday morning will be earnings from Lennar (LEN). The home builder’s stock has plummeted this year. Investors are anxiously awaiting the company’s forecast and how rising interest rates will impact their business heading into 2019. An update on the merger progress with Calatlantic Homes will likely also be on tap. RPM International (RPM) has enjoyed a nice rally the second half of the year. The international sealant and coating company has been restructuring and cutting costs, which has pleased investors. To continue the move up, the company will need to paint a picture of growth in the year ahead, which may not be forthcoming on Wednesday.

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Market Preview: Tariffs and Tesla Stall the Market

Markets traded flat on Friday as they absorbed the latest in the Elon Musk saga, and as pundits began to ponder the possibility of a protracted trade war with China. Tesla (TSLA) has vowed to stand behind its embattled CEO as the SEC is leveling charges of fraud surrounding his tweet about taking the company private. In its initial thrust, the SEC is demanding that Mr. Musk be removed from the board of Tesla. The stock traded down around 14% to lows not seen since April. As the first full week of tariffs went into effect between the U.S. and China, there appeared to be little movement to resolve the differences between the two countries. The fear now is that unlike Mexico, China may take a firm stand resulting in a lengthy and costly trade war between the two global giants. Tariffs may now dominate headlines well into the fourth quarter.

Cal-Maine Foods (CALM) and Stitch Fix (SFIX) kick off October earnings on Monday. Cal-Maine is up slightly on the year. Last quarter Cal-Maine’s CEO warned that proposed tariffs were impacting feed stock for the egg producer. Analysts will be looking for the concrete impact of those tariffs on Monday. Stitch Fix has done nothing but reward investors after going public late last year. But, some worry that a new service being rolled out by Amazon (AMZN) may cut into the data driven clothing provider’s market share. Investors will want to listen closely to any clues on how competition is impacting the company.  

Monday’s economic calendar includes, the PMI Manufacturing Index, ISM Manufacturing Index and construction spending. Construction spending is expected to rise .1% for August. The number is being closely watched as it is a key component in GDP, and economists fear rising prices may be impacting growth. While the FOMC was the focus this week, there are several economic numbers being released next week as the fourth quarter of 2018 gets into gear. Tuesday we’ll see Redbook retail numbers. New mortgage applications, ADP employment, the PMI Services Index and ISM non-manufacturing data will all be released on Wednesday. Jobs will be the focus on Thursday with both the job cuts report and jobless claims being released. We’ll close the first week of October on Friday with employment situation numbers and international trade data.

Tuesday, Pepsico (PEP) and Paychex (PAYX) report earnings. Pepsico should give an update on its recently announced acquisition of SodaStream. Lennar (LEN) and Pier 1 Imports (PIR) report on Wednesday. Analysts will be watching Lennar closely for an update on costs and the lack of construction workers plaguing the industry. Closing out the earnings calendar on Thursday (no earnings are currently scheduled for Friday) are Constellation Brands (STZ) and Costco (COST). Analysts are expecting both strong earnings and an increase in membership levels from the bulk retailer.

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My Personal Plan for Big Gains (and Income) by 2020

Something strange is happening in the investment-bank and hedge-fund world: a growing sense that the next recession (which, by the way, Wall Street has long been wrongly predicting for years) finally has a due date: 2020.

The number of Wall Street firms predicting this date is staggering.

Bloomberg’s Joe Wisenthal has collected a few predictions, such as one from Moody’s Analytics chief economist Mark Zandi, who said 2020 will be the economic “inflection point,” and Société Générale’s economic team, who said the likelihood of a 2020 recession has risen due to, among other things, a tight labor market and higher borrowing costs.

Even former Federal Reserve Chairman Ben Bernanke is getting in on the act, saying a boom “is going to hit the economy in a big way this year and next year. Then in 2020, Wile E. Coyote is going to go off the cliff.”

Doom and Gloom = Cheap 7%+ Dividends for You

This all sounds scary, but the stock market doesn’t care—it’s been too busy surging to new highs:

What, Me Worry?

Stocks’ 10% year-to-date gain means that, if this trend continues, we’ll see a 13% total return for the S&P 500 for all of 2018. That’s far from the kind of market Wall Street seems to be panicking about.

So let’s dig into the fears behind this gloom and doom, and why there’s nothing to fear at all. Then I’ll show you 2 funds you can buy now that will get you all that is best about this still-strong US economy.

And when I say “best,” I’m talking huge dividends up to 10%, and long-term performance that tops the market’s return, too.

But first, let’s dive into 3 fears that are driving the market today, so we can see what’s setting up the 2-fund opportunity I’ll show you toward the end of this article.

Hysterical Fear No. 1: An Inverted Yield Curve

By far, the biggest panic of 2018 has been over the yield curve.

When the difference between the yield on the 2-year US Treasury and the 10-year US Treasury goes negative for longer than a few days, America falls into recession. This is pretty much clockwork: it’s happened every time for decades, making this the most reliable recession indicator.

And the yield curve—that is, the difference between these two yields—has been narrowing since February 2018, when the market’s last major sell off hit:

A Worrying Indicator?

Note, however, that the fast decline from February to July has abated, and we are now about where we were in July.

This doesn’t mean an inverted yield curve isn’t coming (it still looks likely), but it isn’t coming yet. And since a recession typically happens about 12 to 18 months after the inverted yield curve appears, we still have plenty of time to tap the market’s rising gains (and dividends), starting with the 2 funds below.

Hysterical Fear No. 2: Declining Profits

The second fear is so silly it almost isn’t worth taking seriously—until you realize a close look at this fear shows just how wise it is to buy stocks now.

And that worry is that corporate profits are perfectly positioned to start falling.

That sounds bad—until you look into why they are so well positioned to fall: because they’re so absurdly strong right now.

Let me quote FactSet: a “record-high percentage of S&P 500 companies beat EPS estimates for Q2.” That sounds good—and then when you realize just how high expectations were, you realize this isn’t just good, it’s amazing.

Despite expectations of 23% earnings growth (itself higher than the first quarter’s 20% rise), the market reported 25% growth. A staggering 80% of companies beat expectations—far beyond the former record holder, the first quarter of 2018.

Earnings Crush (High) Expectations

Here’s the Chicken Little logic: with earnings growth this high, how can it possibly get any higher?

Of course, this is an old fear we saw in the third quarter of 2014, when oil prices were crashing and pundits warned that a 2008-style disaster was about to unfold. Here’s what the market has done since then:

62% Gains in Just 4 Years

The bottom line? If you sell into today’s fears, expect to miss out on gains like these.

Hysterical Fear No. 3: Tariffs, Tax Cuts and Trump

The 3 “Ts” that are driving many financial fears are largely political, with a lot of attention honing in on two moves by Donald Trump.

The first move was the 2017 tax cuts that many economists have said could overheat the economy. The second, and more alarmist, fear is that Trump’s tariffs, specifically those aimed at China, will result in a trade war that kills US exports.

The trade-war fears largely drove the market correction in February, but there’s just one problem: the tariffs are too small to matter. Even at their recent expansion to $250 billion in imports, tariffs on Chinese goods represent about 1% of America’s economy. And those tariffs are effectively a tax of about 13% of those $250 billion—meaning the actual impact on the US economy is about 0.17% of GDP.

These are microscopic numbers. Yes, they could increase—but until they do, the drag on the economy from tariffs is too small to matter, meaning it’s too early to respond from an investment point of view, no matter what your politics may be.

The Right Response

Still, these fears feel like they warrant some type of response, so what should it be?

Simple! As canny contrarians, we’re going to pounce on these overdone worries and buy stocks now.

But what’s the best way to do it?

If you choose to buy stocks individually, you’ll need to invest a lot of time and/or money in research. Pick a low-cost index fund like the SPDR S&P 500 ETF (SPY) and you’ll likely enjoy a strong return. But that return will, by definition, be mediocre, because SPY doesn’t try to pick winners or losers. Plus, SPY’s dividend yield is a joke at 1.7%.

Then there’s the path less traveled: high-yield closed-end funds (CEFs) that invest in many S&P 500 stocks and offer a shot at better price gains, along with a higher income stream (and not just a little higher: payouts of 7% and more are common in CEF land).

2 Funds Set for Big Gains (and Dividends) as Wall Street Frets

Our first pick is the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), which provides a mix of equity exposure and insurance on a big market slide to provide returns, because this fund uses call options (a kind of insurance against stock exposure) to limit downside risk.

It also boasts an outsized 6.7% income stream that’s nearly 4 times the S&P 500’s average yield. Plus, SPXX has closely tracked the market in terms of overall performance while providing that bigger income stream:

SPXX Hands You Your Win in Cash

Or you could snap up the Liberty All-Star Equity Fund (USA) and its incredible 10% dividend yield, as well as its portfolio of mid-cap and large-cap US stocks. This one has actually beaten the “dumb” index fund over the last decade, too:

A Massive Return Over the Long Haul

Whatever path you take, it’s pretty clear that now is not the time to panic—even as we keep our eyes peeled for whatever 2020 may bring!

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