You’ll Need More Than Gold to Protect You From Coronavirus

Palm Beach Daily

You’ll Need More Than Gold to Protect You From Coronavirus

By Grant Wasylik, analyst, Palm Beach Daily

Every morning, 68-year-old retiree Carl M. thumbs through The Mercury to check the price of gold.

When he has extra cash, he hops in his pickup and makes the short drive to High Street in Pottstown, Pennsylvania… to buy gold from Barry’s Coins, Federal Coin Exchange, and American Cash Traders.

Unfortunately for Carl, the 2008 financial crisis obliterated his nest egg. And he’s shunned stocks ever since.

So today, over 50% of his investable assets are in gold.

His hoard contains one-ounce gold bars and coins – like American Gold Eagles, American Buffalos, Canadian Maple Leafs, and Krugerrands.

You can probably tell Carl is a gold bug. As he says…

I like gold because it’s tangible. I can hold it. When you have a couple coins in your hand, you can feel the weight of your wealth. It’s very different from seeing your wealth on a computer screen. And if I get into a bind, I can cash in a bar or a coin… Gold will always be worth something.

Now, gold is having a good run. Since the recent market pullback on coronavirus fears, gold’s up 3.8% while the S&P 500 is down over 3%. And that’s great for Carl and other gold investors.

But let’s keep some perspective here…

The S&P 500 trounced gold last year – 31.5% to 18.3%. And even baking in recent volatility, stocks are outperforming gold 13.3% to 8.7% over the last six months.

However, there’s a group of stocks outperforming both stocks and gold. And they hold up better than gold during sell-offs.

If the coronavirus turns into a global pandemic, you’ll want to own some gold as a hedge against financial panic. But you’ll want to own these stocks as portfolio protection, too…

The Untouchables

Since 2008, gold has recorded four years in the red: 2018 (-1.6%), 2015 (-10.4%), 2014 (-1.4%), and 2013 (-28.3%). Yet our group of little-known stocks hasn’t posted any declines over the past two decades.

We call these stocks the “Untouchables,” because no one can touch their performance…

Over the last 20 years, they’ve beaten the S&P 500 by 1,878% and gold by 1,680%.

To find Untouchables, we studied every major bear market over the last two decades.

We combed through 19,000-plus publicly traded stocks in North America to pinpoint ones that hadn’t dropped 10% or more during any calendar year since 2000. (And this period encompasses two major bear markets.)

So unlike most stock-picking methods that expose you to 30–40% drops during bear markets, this method stays afloat even in the worst downturns.

We found our Untouchable stocks all share five key traits:

  • They have simple business models.
  • They pay dividends.
  • They have ultra-low volatility.
  • They produce positive returns when the broader market declines.
  • They outperform the market long term.

These stocks fought through each year without going down by double-digit percentages. And holding them keeps you calm. That’s crucial for allowing you to stave off emotional decisions and remain invested.

The strategy has proven to be very profitable, too…

As you can see in the chart below, the Untouchables have crushed the stock market in a safe way (compare the wavy line on the right to the steady rising line on the left):

Click to enlarge

Over the last 20 years, the S&P 500 has had a cumulative return of 227%. Meanwhile, our Untouchables strategy has returned an average of 2,105% over the same time frame.

That’s nine times the S&P 500’s return.

The Power of Untouchables

Let’s assume Carl bought $100,000 worth of gold during the 2008 Great Recession. At the end of 2019, his gold holdings would’ve been worth $172,000 – a 72% gain.

But if he’d invested that $100,000 in Untouchable stocks, his assets would've grown to $592,300 – a 492% gain. That's seven times more than what he would've made with gold… with much less risk.

Now, if you’re convinced gold is going higher, we don’t disagree with you. But if you’re overweight gold (over 5% per our asset allocation model), we’d encourage you to move part of your allocation to the Untouchables.

You’ll make more money when the market heats up. And you’ll sleep soundly with better downside protection.

So with this current bout of volatility, consider an Untouchable stock like consumer staples giant Johnson & Johnson (JNJ).

It’s broadly diversified through three key business lines: consumer products, pharmaceuticals, and medical devices. And it pays a 2.5% yield.

But remember: Always do your homework before investing in any company. And never invest more than you can afford to lose, even in safe stocks.

Regards,

Grant Wasylik
Analyst, Palm Beach Daily

P.S. Because of his track record, Daily editor Teeka Tiwari has been called America’s No. 1 investor. And one way he’s outperformed the S&P 500 is by adding Untouchables to our Palm Beach Letter portfolio.

Now, Teeka’s prepared to put his track record on the line again with a new idea. It’s a groundbreaking technology that he firmly believes will be the best place to grow your money over the next 10 years.

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www.palmbeachgroup.com

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