Six Stock Investing Strategies Shared by Seasoned Trader

Six stock investing strategies shared by seasoned trader Bryan Perry show successful ways to pursue profits.

The six stock investing strategies shared during Perry’s recent presentations at the FreedomFest conference in Memphis, Tennessee, showcased savvy steps to strengthen portfolio performance. Perry, who heads the stock-focused, high-income Cash Machine investment newsletter and the options-only Breakout Options Alert, shared his six stock investing strategies during two presentations during the conference’s Global Financial Summit.

The six stock investing strategies shared at FreedomFest are aimed at finding stable stocks in an unstable market, enhancing knowledge to limit fear, reducing risk through diversification, discovering the beauty of non-correlated asset classes, steering clear of yield traps and selectively using options to rake in profits from market volatility. The first five of those six stock investing strategies are put to use in Perry’s Cash Machine investment newsletter, while the options trading guidance is provided through his Breakout Options Alert service.

Bryan Perry

The current investing landscape for stock investors who also want income is complicated by the following challenges, Perry told FreedomFest attendees:

• Global central banks are fighting inflation with a goal of reducing it to 2%
• The Federal Reserve is likely to cease raising rates this year, then cut the Fed Funds Rate in 2024 to further flatten the yield curve
• China’s post-pandemic economic reopening is not as robust as expected

Six Stock Investing Strategies: Find Stable Income Stocks in an Unstable Market

To achieve the goal of finding stable income stocks in an unstable market, Perry puts to use a high-yield portfolio. He seeks to select stocks and funds with the following attributes.

• High-quality business fundamentals
• Earned income from organic growth
• Responsible use of leverage
• Active, dynamic sector rotation
• Don’t swim against the tide

Six Stock Investing Strategies: Enhance Knowledge, Reduce Fear

To enhance knowledge by reducing fear, Perry spoke of the importance of understanding each high-yield income asset. Perry cautioned that there is “no such thing” as a casual trade.

To pursue this priority of enhancing knowledge, Perry said he takes the following actions:

• Drills down and performs solid due diligence
• Calls the company or portfolio manager, when needed
• Assesses why each holding fits into the overall yield portfolio
• Constantly checks and validates that investing themes remain intact

Six Stock Investing Strategies: Reduce Risk Through Diversification

“There is no substitute for a broad array of holdings in many different sectors,” Perry told attendees. He shared the value of sometimes using exchange-traded funds (ETFs), exchange-traded notes (ETNs) and closed-end funds (CEFs) in conjunction with individual stocks.

In compiling the Cash Machine portfolio, Perry said he favors:

• 20-25 holdings to offer a good balance
• Not putting any more than 5% in any on position
• High-yield investing as a dynamic opportunity that allows quick portfolio changes, if needed

The current Cash Machine portfolio features these diverse choices:

• Utilities
• REITs
• Global energy stocks
• Preferred Securities
• Convertible Securities
• Equity/index covered call CEFs
• Energy master limited partnership (MLP) ETFs
• Mortgage real estate investment trusts (REITs)
• Investment management companies
• Private equity
• Business development companies (BDCs)
• Electric vehicle (EV) automotive stocks
• India fund

Six Stock Investing Strategies: Discover the Beauty of Non-Correlated Asset Classes

Uncertain investing landscapes require counter levers to level out volatility, Perry cautioned. To protective the portfolio, he uses non-correlated asset classes.

In navigating a daily “tug-of-war” between the inflation and deflation camps, he spoke of trying to do the following:

• Strike a good balance between defensive and offensive assets
• Be careful not to bet the ranch on a single sector, no matter how good it appears
• Maintain genuine offsetting assets

Six Stock Investing Strategies: Steer Clear of Yield Traps

Even though Perry screens to find high-yield assets, the practice can be “dangerous” to one’s financial health if not done well, he warned. If an investment looks like “smoke and mirrors,” it probably is just that, he added.

One risk is that rising yields can reflect lower underlying stock prices, Perry said. Investors need to give heavy scrutiny to managed income distributions, he continued.

“Look out for one-time payouts that skew yields,” Perry said. “Avoid semi-annual dividend payers.”

As far as the current Cash Machine portfolio structure, Perry described it as follows:

• 29 income generating holdings with a blended yield of 10.5% accompanied by capital gains of 10-15% per year
• Objective to maintain 10%+ current yield on lower market risk
• Current macroeconomic and interest-rate environment remains ideal for strategic high-yield investing.
• Maintain focus on domestic assets

“Market conditions for high-yield assets are improving,” Perry told the attendees. “Volatility cannot be fully avoided but can be reduced.”

The timing of when to reduce market exposure and apply hedges into strength is a key skill, Perry continued. Avoid the mistake of becoming complacent by  using proactive when markets look vulnerable or frothy, he added.

Perry proposed using hedging strategies when necessary to offset risk without sacrificing income. His strategies have helped to provide double-digit-percentage returns in his Cash Machine portfolio and he discussed he plans to keep doing so.

Six Stock Investing Strategies: Use Options to Rake In Profits from Market Volatility

Trading options is a way to profit from market volatility, which has returned to historically high levels, said Bryan Perry, who heads the Breakout Options Alert. Key reasons to use options include the following:

• The stock market is beset with a number of converging forces that are pulling and pushing on investor sentiment.
• Heavy spending by Congress versus the Fed raising interest rates is causing peak uncertainty.
• No one knows when inflation will come down to a level that is acceptable to the Fed.
• The war in Ukraine appears to be dragging on.
• Stubbornly high energy costs risk putting Europe into recession.
• Reopening of China’s economy could be complicated by a new virus.

Large swings in the stock market expand option premiums, Perry said. He shared the following examples of possible events that could cause extreme volatility:

• The Dow is seeing point swings of several hundred points a day.
• Potential for “black swan” events has the market trading with peak uncertainty conditions.
• Russia’s President Putin may get desperate and use thermobaric, non-nuclear weapons.
• China triggers President Biden on his promise to send troops, if Taiwan isinvaded.
• The Iran deal could cause Israel to launch attacks on strategic targets.
• A large-scale credit default event within China or Europe is the number one concern of institutional global fund managers.
• More regional banks could fail as commercial real estate loan defaults rise.

The general concept of Breakout Options Alert:

• A $50,000 long-dated call/put option portfolio can control $1,000,000 worth of stock in long-term call and put options.
• The stocks that matter most to the market trade from $100-$1000 per share, or higher.
• Directional trades target holding periods of 2 weeks to 2 months.

How long-dated options work, according to Perry:

• The word “options” is typically associated with a high degree of risk.
• If buying short-term, way out-of-the-money put and call options, this statement is true. About 90% of all puts and calls purchased expire worthless.
• Don’t be so greedy. Consider in-the-money, at-the-money, slightly out-of-the-money options with extended time frames of six months or more.

Those interested in the six stock investing strategies shared by Perry can pursue them by following the Cash Machine investment newsletter and the Breakout Options Alert recommendations. Income-producing stock strategies featured in Cash Machine may hold special appeal to fend off political risk due to Russia’s unrelenting invasion of Ukraine that recently has attacked the important agricultural port of Odessa and the nation’s grain storage facilities in an apparent attempt to cause food shortages, exacerbate a humanitarian crisis, limit the neighboring country’s exports and raise the price of grain to benefit the economy of the grain-producing aggressor. With Russia’s President Vladimir Putin waging deadly attacks against civilians in Ukraine, the value of following the six stock investing strategies to protect against political risk may hold particular appeal right now.

Watch this video to hear more of my thoughts.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.