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Fast Money

Long-Term Investors Should Look for This in Stocks


If you’re playing the market for the long-run, Mike Ryan of UBS says one criteria probably matters most as you pick stocks.

In a word it’s dividends.

He thinks a structural shift is coming into the market, in which stock buyers will become more focused on the income component of their equity portfolios.

The Great Deleveraging

“Demographic changes, volatility and a search to replace lost income will drive this secular shift,” Ryan says.

In other words, going forward, the way investors will put money to work will be more and more focused on generating income – and as a result, stocks that pay dividends will become incrementally preferable.


NEW SLIDESHOW: The Biggest Momentum Stocks of 2011: Buy or Sell?


As you pick stocks for your portfolio, Ryan suggests asking yourself the following:
- Does the company have a strong balance sheet?
- Does the company have good growth prospects?
- Can the company generate an increase in dividend payouts over time?

If a company meets all 3 criteria he thinks it’s a buy.

It’s important to note, that Ryan is talking long-term. “This is a marathon and not a sprint. This strategy isn’t about doing well for January, it’s about positioning to do well this year and next year.”

Trader Joe Terranova agrees with the thesis. “The dividend paying strategy is a defensive strategy and I think it works.”

* On a related note, Keith McCullough of Hedgeye tells the desk if you have a one year time horizon he likes the consumer discretionary sector to buy and hold.

His thesis is pegged to the belief that the dollar will remain strong through 2012.  “A strong dollar creates a very different investing environment. It gives consumers more purchasing power. That’s good for the consumption stocks,” he says.

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Trader disclosure: On Jan 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders Terranova is long VRTS; Terranova is long IBM; Terranova is long LQD; Terranova is long CSCO; Terranova is long AXP; Terranova is long NFLX; Terranova is long APC; Terranova is long OXY; Terranova is long TRLG; Terranova is long MUB; Terranova is long SU; Terranova is long EMC; Terranova is long SBUX; Terranova is long DECK; Terranova is long CSX; Terranova is long SJM; Terranova is long XOM; Terranova is long JNPR; Terranova is long PNC Feb. $60 calls; Terranova is long WFC Feb. $29 callsAdami owns C; Adami owns GS; Adami owns MSFT; Adami owns AGU; Adami owns INTC; Adami owns BTU; Adami owns NUE; Najarian owns AAPL; Najarian owns BAC; Najarian owns GS; Najarian owns BCS; Najarian owns TXT; Najarian owns URBN; Najarian owns INTC; Najarian owns CMC; Najarian owns FSLR; Najarian owns WYNN; Najarian owns DHI; Najarian owns LEN; Najarian owns WLT

For Rich Ilcziszyn
No disclosures

For Russ Girling
No disclosures

For Moshe Orenbuch
I, Moshe Orenbuch, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report

For Mike Ryan
No disclosures with wires.