Market corrections are part of life.
The trick is knowing what to do next. Maybe you've been stockpiling cash for just this reason. Or maybe some of your stocks hit their trailing stops, and you're wondering where to put your money.
No matter your situation, you've come to the right place.
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While the uninitiated may be scared out of the market altogether, smart investors like you are looking at share prices like a kid on Christmas.
You see, after 11 years of this bull market run, stocks were getting just a bit too pricey.
The S&P 500 was trading at 18.9 times projected earnings. That was up from 16.2 a year ago and – save for a brief moment in early 2018 – it was the highest forward P/E for the index since May 2002.
That meant all investors were paying a premium just to own shares of the top companies. That's a hard pill to swallow for many investors. But when stocks keep rising, there are few alternatives other than to fork over the cash.
But a correction is like putting stocks on sale.
We know that over time, the market's trajectory is always up. A correction like this one gives you the chance to make even more money by buying the dip.
Except not every stock is worth owning.
That's why we turned to Money Morning Chief Investment Strategist Keith Fitz-Gerald.
As Keith says, "Even a few hundred bucks or just 1% of your cash on hand could mean the difference between getting taken to the cleaners and fighting back profitably."
Keith laid out the six criteria he's using for finding the stocks with real profit potential right now.
Here's what the stocks on your buy list should have:
- Market capitalization greater than $1 billion.
- Altman Z-Score greater than 2.
- Yield above the average S&P 500 stock.
- Dividend payout ratio less than 60%.
- Dividend growth greater than 5% over the past five years.
- At least two consecutive years of dividend increases.
Stocks that fit the bill are stable, income-producing companies that are more likely to bounce back from a crisis like this. You'll not only be able to lock in an above-average dividend yield thanks to the correction, but stable stocks like these are where the money will head first once the rally ignites.
To help you get started on building your wish list, we've found three stocks that meet these criteria.