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First things first. If we were in Pamplona, Saut would fit right in. That’s to say, he’s quite comfortable with the bulls. Perhaps that’s why his case for the the next bull run in stocks is so compelling – and simple.
“Since 1926 (stocks) have averaged a total annualized return of 10.4%.” writes Saut on Minyanville. And he adds that excluding the financials most corporate balance sheets are in relatively good shape. That alone, he says, makes stocks attractive.
And as you can tell from the title of this post he thinks the next leg is higher. He tells Fast Money, “I think stocks made their capitulation low on October 10th and I think we made the price low on November 20th.”
He’s particularly bullish on companies that pay dividends – and not just for the obvious reasons. Saut believes these stocks could attract a lot of new investors going forward, especially baby boomers nearing retirement.
"The baby boomers are retiring; and, the yields afforded them... won’t supplement their retirement account incomes enough to support them in the style to which they have become accustomed," he says. "Enter stocks."
In fact, he expects dividends to become so attractive that more firms start offering them. “My analysis suggests that managers will probably pursue shareholder-friendly initiatives… this implies they will likely pay, and/or increase, dividend streams.”
Let's see 10% average return since 1926, capitulation selling, dividends, and attractive to boomers. Quite the case for a tailwind, indeed.
What’s the trade?
I recommend long the S&P, counsels Saut. (You can play it with the SPY [SPY
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] or the SSO [SSO
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] which is geared 2-1 to the upside). “When the whole world is betting against things turning around, it’s usually a good idea to take the other side of that bet.”
Read More:
> Jeff Saut: Making A Case For The Bulls
- Your First Move For Wednesday March 18th
- Web Extra: Fast & Furious Trades For Wednesday
- Last Stock Standing: Financials
- Pops & Drops: Home Depot, Exxon...
- Your Questions About... Crude Oil, Biotech
- Macke: 3 Stocks To Sell
- Hewlett-Packard Under Assault
- Nike, Still Got Game?
- Are Low Priced Stocks, Cheap?
- Late Buyers Fuel Surge
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Trader disclosure: On Feb. 3rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE): Macke Owns (ERTS), (TM), (DIS), (MS), (SDS): Macke Owns (ERTS) Calls: Finerman's Firm Owns (DNA) & (DNA) Call Spread: Finerman's Firm Owns (MSFT), (TYC), (IBB), (XBI), (TBT): Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (BBT): J. Najarian Owns (WFC) Preferred; J. Najarian Owns (BAC) Preferred; J. Najarian Owns (C) Preferred; J. Najarian Owns (FCX) & (FCX) Long Calls; J. Najarian Owns (GDX); J. Najarian Owns (JPM) Preferred; J. Najarian Owns Gold Futures; J. Najarian Owns (ISRG) Call Spread
Saut Owns (SPX); Saut Owns (SSO)
Raymond James Received Compensation From (ESS)
Raymond James Makes A Market In Shares Of (HCBK)
Raymond James Makes A Market In Shares Of (NRGY)
Raymond James Sole-Managed A Follow-On Offering of Share of (NYB)
Raymond James Received Non-Investment Banking Compensation From (RSG)
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