Durable Dividends

Finding Peace Of Mind With A Bear Market Wish List

Nick Ward

56 postsMay 9, 2022

I just finished up writing the weekly portfolio breakdowns for the Intelligent Dividend Investor and the Intelligent REIT Investor premium services.

I began both of those reports by highlighting the macro weakness that we saw late last week.

I said, “We saw the market rally more than 1,000 points in response to the Federal Reserve meeting on Wednesday, largely because Fed. Chair Jerome Powell mentioned that 75 basis point increases were not on the table.

Well, this relief rally didn’t last long. On Thursday, the market gave back all of its Wednesday rally…and more…with the Dow Jones Industrial average falling by 3.12%, the S&P 500 falling by 3.56%, and the tech-heavy Nasdaq falling by 4.99%.”

In short, this meant that Thursday of last week was one of the worst days that the major averages had seen since 2020 (during the COVID-19 crash).

Source: CNBC

On Friday, that negative momentum remained in place, with the Dow falling 0.30%, the S&P 500 down by 0.57%, and the Nasdaq sinking another 1.40%.

Without a doubt, days like Thursday can be scary for investors.

Admittedly, I was happy to see the big red numbers because it meant that I could put cash to work buying shares of blue chip companies that were beaten down to irrationally low levels by the rush for the exits that we were witnessing on Wall Street.

Countless times, I’ve written about the importance of being able to wear a contrarian hat and confidently buying blue chips into such weakness. The way I see it, taking advantage of market weakness is the best way to accelerate one’s journey towards financial freedom. Buying low means a wider margin of safety and a higher yield on cost; two things that should augment returns over the long-term. But, this sort of discipline has taken years to develop.

Therefore, once again, I’ll do my best to provide a sense of solace and peace of mind with this week’s Durable Dividends article…

I continue to believe that long-term investors are best off overlooking the doom and gloom that fill the headlines on days like we saw last week and instead, viewing them as an opportunity to accumulate shares of wonderful companies at discounted prices.

We all know that we should be buying low and selling high, so why is this so difficult to put into practice?

I’ve written about this before in Durable Dividends articles, but I think it bears repeating…

As Aswath Damodaran, Professor of Finance at the Stern School of Business at New York University, and often referred to as the “Dean of Valuation” likes to say…the 7 most dangerous words in finance are: “Do they know something that I don’t?”

The “they” that he’s referring to is the market at large. The herd.

On Thursday of last week, something like 90% of the volumes in the market were dedicated towards declining stocks. In other words, fear ruled the day.

There weren’t many buyers of the dip (I was obviously an outlier). And, while some view this sort of signal as a bullish one (pointing towards capitulation)…I know that it can be very difficult for many investors to find a ray of sunshine during such a gloomy (and doomy) day like that.

I believe that there are many high quality stocks trading with attractive valuations at the moment, but I also know that there are many investors out there who are beginning to second-guess their evaluation process, wondering if they’re missing something, or if they’re wrong about their medium-to-long-term outlook, because obviously, the herd cannot be wrong, right?

If you’re someone who falls into this group, I offer this strategy, or mental exercise to you, as something that might keep you sane during market sell-offs…

Make a market crash wish list. Check it twice. And stick to it.

What I mean is, put together a shopping list of the very highest quality companies in the world…companies whose brands are so strong that they couldn’t possibly fail, companies whose sales and earnings growth trajectories are so steep, their quality is unquestionable, companies that benefit from the strongest, highest conviction secular tailwinds, companies with world-class balance sheets and multi-decade dividend growth streaks, companies that have absolutely crushed the markets over long periods of time, etc, etc, etc…

Find companies that you believe in so strongly over the long-term and focus fiercely on them during downturns.

The term “blue chip” is often thrown around loosely in the markets.

Heck, I’m probably guilty of that myself.

But, I’m talking about companies here that have ascended from the realm of blue chips and exist in the rarified air of best-in-bred status.

When it comes to the very best of the best companies…well, their quality is undeniable. Even an outright market crash likely won’t cause you to second guess your desire to buy these types of stocks into weakness.

During trying times like we saw on Thursday/Friday of last week, having a list like this can provide hope during an otherwise fearful moment….hope that you’ll finally be able to accumulate shares of your desired market crash targets.

Oftentimes, these are the types of stocks that you wish you owned, but you don’t, because they’ve always been too expensive.

When we’re talking about alpha dogs in the market, it makes sense for them to trade with extraordinarily high valuation premiums. Even the reckless herd can recognize top-notch quality. Unfortunately, the herd’s penchant for irrational behavior perpetuates overzealous premiums, but when that greed switches to fear, opportunities arise.

For instance, there are a handful of companies that I have tracked closely for years and years, but have never had the chance to buy, because the stocks have never fallen down to valuation levels where I believed that they offered an attractive margin of safety.

The stocks on each investors’ market crash list will vary, but as for me…I’d love to finally have the opportunity to back up the truck buy shares of stocks like Costco (COST), McDonalds (MCD), Proctor and Gamble (PG) – all wonderful companies that I’d love to own, given the opportunity to buy shares at an acceptable price point.

Or, I’d absolutely love to add to existing positions in my portfolio, such as Visa (V), MasterCard (MA), and Prologis (PLD), that I rarely get to add to, because of sky-high premiums.

Having a list like this not only keeps me calm during market weakness, but it actually has me rooting for it.

There is little doubt in my mind that best-in-breed stocks like this will generate fantastic returns over the long-term, so long as they’re purchased with adequate margin of safety.

The way I see it, any chance that I get to buy shares of such companies at fair value or better is a massive step in the right direction when it comes to my journey towards financial freedom.

And therefore, when I wake up in the morning and read headlines about the market cascading 1,000 points, I don’t feel anxiety; I feel excitement as I begin to check the share prices of the companies on my bear market watch list.

This article is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended. It does not guarantee that securities mentioned in this newsletter will produce profits or that they will equal past performance. Additionally, we are not an investment advisor and do not offer securities or tax advice. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. Nicholas Ward, contributors and staff members of Wide Moat Research may hold positions in some or all of the stocks listed.

Disclosure: Of the stocks mentioned in this article, Nicholas Ward is long V, MA, and PLD.

Nick Ward

56 posts

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Nicholas Ward is a research analyst who currently writes for Seeking Alpha, The Dividend Kings, iREIT, and Forbes Real Estate Investor. Before that, he was Founder and Editor-in-Chief of The Dividend Growth Club, as well as the Income Minded Millennial. Nicholas has also contributed to Sure Dividend, Investing Daily, and The Street, where he covered stocks in Jim Cramer's Action Alerts PLUS Portfolio.

Nicholas holds a bachelor of arts from The University of Virginia, where he studied English and studio art. Prior to transitioning into the financial industry, he managed a vineyard in the foothills of the Blue Ridge Mountains.

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Finding Peace Of Mind With A Bear Market Wish List

Nick Ward

56 postsMay 9, 2022

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