For Immediate Release
Chicago, IL – June 16, 2022 – Zacks Market Edge is a podcast hosted weekly by Zacks stock strategist Tracey Ryniec. Each week, Tracey is joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how they impact your life. To listen to the podcast, click here: https://www.zacks.com/stock/news/1939483/the-secret-weapon-of-long-term-stock-investors
The secret weapon of long-term stock investors
Welcome to Episode #318 of the Zacks Market Edge Podcast.
- (1:00) – The Power of Dollar Cost Averaging: Should You Keep Buying?
- (9:30) – Finding strong stocks to invest in for the long term
- (21:15) – Episode Summary: MSFT, SHOP, ETSY, MPC, SIG, TTE
Each week, presenter and Zacks equity strategist Tracey Ryniec is joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how they impact your life.
This week, Tracey will be speaking alone about the secret weapon that long-term stock investors can use during a stock market sell-off: dollar cost averaging.
Dollar cost averaging is when an investor invests the same amount of money on a set schedule, perhaps once a week or once a month, regardless of whether the stock market is higher or lower at the time.
Two ways to dollar cost average
There are really two ways investors can cost average dollars.
1. Buying indices like the S&P 500 or the NASDAQ
2. Purchase of individual shares
Tracey thinks one works better than the other.
As she’s mentioned on previous podcasts, Tracey began averaging dollar savings in 2000 and 2001, after the stock market had already started selling off in the dot-com bust Microsoft (MSFT).
Microsoft was one of the 4 tech titan stocks of the 1990s that was one of the big stock winners of the decade. Many Microsoft employees have become millionaires through their stock options.
When the sell-off started in 2000, Microsoft suddenly seemed to be on sale. But it was fake. Although Tracey averaged dollars for several years, she eventually dropped from stock in 2005-2006.
Microsoft stock didn’t return to the highs of 2000 until 2013.
Is Shopify the Microsoft of this era?
Shopify (SHOP) was one of investor favorites of the pandemic, with stocks soaring to new all-time highs. At one point in the last 5 years, Shopify stock is up over 1750%.
But they’ve fallen 75% in the last year and are now up just 249% in the last 5 years. That still beats the NASDAQ’s 5-year return of 76%, but the outsized gains were wiped out in 2022.
For some investors, it seems like Shopify stock is for sale after the big slide. But are they?
Shopify is still trading at a forward P/E of 102.
Is Shopify a value trap like Microsoft was in 2001?
Go in a new direction
If you want to buy average single stocks at a dollar cost, you’re going in a new direction. What worked for the last 5 years may not work in the next 5.
Use Zacks Rank to find stocks with rising earnings estimates and look for stocks with favorable price-to-earnings and price-to-earnings ratios.
3 Zacks Rank Strong Buy stocks that are cheap
1. Marathon Petroleum (MPC)
Marathon Petroleum is a refinery company. Shares are up 63% year-to-date, leaving some investors hesitant to jump in “at the top.” This is why averaging is so effective. It takes away the fear of buying to the highs because it happens automatically.
Marathon Petroleum is very cheap with an expected P/E of just 7.5 and a P/S ratio of 0.4. It also pays a dividend, currently yielding 2.3%.
Marathon Petroleum is a Zacks rank #1 (strong buy).
Should you join Marathon Petroleum?
2. Seal Jewelers (SIG)
Signet Jewelers is the beneficiary of the 2022 wedding craze. The company operates Kay, Zales and Jared retail stores and sells online. This is a record year for weddings as couples who postponed it in the first two years of the pandemic are now diving in. That means more jewelry sales.
Signet’s revenue is expected to grow another 5% this year, and earnings estimates are rising.
After beating the first quarter of 2023, analysts have raised their estimates for the full year. The Zacks consensus estimate has risen to $12.47 from $9.82 just 90 days ago.
But Wall Street is concerned about consumer spending as inflationary pressures mount. Shares are down 31% year-to-date.
Signet is dirt cheap with a forward P/E of just 4.7 and a P/S ratio of 0.4. It also pays a dividend of 1.4%.
Is it a good strategy to shop at an average dollar cost from some retailers like Signet Jewelers this year?
3. Total Energies (TTE)
TotalEnergies is a large French integrated oil and gas company. With oil and natural gas prices at multi-year highs, TotalEnergies is expected to see rising earnings in 2022.
The Zacks consensus estimate for 2022 calls for $11.81, which translates to 76.8% earnings growth compared to last year when it returned $6.68.
TotalEnergies currently pays a dividend of 5%.
It’s also dirt cheap, with a forward P/E of 4.7 and a P/E of 0.6.
TotalEnergies shares are up just 13.5% in 2022.
Is TotalEnergies an insider tip?
What else do you need to know about the dollar cost average?
Tune in to this week’s podcast to find out.
[In full disclosure, Tracey once again owns MSFT in her personal portfolio. She bought shares again in 2019. No, she is not currently dollar cost averaging into it.]
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Microsoft Corporation (MSFT): Free Stock Research Report
Signet Jewelers Limited (SIG): Free Stock Research Report
Marathon Petroleum Corporation (MPC): Free Stock Research Report
Shopify Inc. (SHOP): Free Stock Research Report
TotalEnergies SE Sponsored ADR (TTE): Free stock analysis report
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