A Rough Day on Wall Street

Earn While You Learn! ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, A Rough Day on Wall Street There was no hiding place worldwide, as the fears of a U.S. economic recession spurred a brutal sell-off in global markets. The Nasdaq began the day with a nasty plunge of 6%+ before recovering slightly to finish the day with a 3.43% loss. It was the worst day in about two years. More importantly, the sell-off saw the biggest volume since June 28th. What was going on? Wall Street is worried about a potential recession after last Friday’s weak jobs report. There is even speculation that the Federal Reserve would call an emergency meeting to cut interest rates before its next meeting in September. In fact, the odds of an emergency rate reduction over the next week jumped to a 60% chance before cooling down. Economic data hasn’t shown signs of a recession yet, but it is all about trends. Once a downtrend is formed, it is difficult to arrest the economic slowdown. It’s all about trying to get ahead of the trend. - “The economy is not in crisis, at least not yet,” said Callie Cox at Ritholtz Wealth Management. - “But it’s fair to say we’re in the danger zone. The Fed is in danger of losing the plot here if they don’t better acknowledge cracks in the job market. Nothing is broken yet, but it’s breaking and the Fed risks slipping behind the curve.” Callie Cox at Ritholtz Wealth Management (Photo: CNBC) Quincy Krosby at LPL Financial doesn’t believe a bear market is guaranteed yet. Rather, it might be a simple pullback as long as certain catalysts happen — a rate cut by the Fed, positive economic data, and the S&P 500 bouncing from its 200-day moving average. - “What markets are experiencing is an unwinding of that bullish positioning,” she said. “Watch for signs of a capitulating Fed, timely evidence of a growing economy, and a successful test of the 200-day moving average on the S&P 500 for signs a bottom may be in.” Some bears aren’t too convinced, as JPMorgan Chase’s Mislav Matejka warned that business activity dropped and earnings outlook deteriorated. - “This doesn’t look like a ‘recovery’ backdrop that was hoped for,” Matejka wrote. “We stay cautious on equities, expecting the phase of ‘bad is bad’ to arrive,” he added. At the same time, Keith Lerner at Truist Advisory Services pointed out that the S&P 500 averaged a maximum intra-year pullback of 14% in the past 40 years. So, an investor should expect steep losses each year in the stock market. Despite these pullbacks, stocks rose 33 out of 40 years. - “While always uncomfortable and typically accompanied by bad news, pullbacks are the admission price to the stock market,” Lerner said. “This is what provides the potential for higher longer-term returns relative to most other asset classes.” “Southwest Airlines of Telecom” Can Offer You A 20% Yield If You Hold For A Decade The recent market’s decline teaches the valuable (and timeless) investing lesson: Invest like you are buying a private business. The lesson is simple, but it can save you an untold amount of money. The mindset is different when you buy a private business, and the reason is two-fold. The number one is illiquidity. You can’t buy and sell a private business on the same day. So, you are forced to think long-term -- such as a 3- or 5-year horizon. Secondly, because of its illiquidity nature, you can’t buy an overvalued business and hope that the price would rise and you’d sell before the price drops. Therefore, you’ll emphasize the private business to justify your original investment through cash flow. Having a superior cash flow is your floor to a company’s valuation. A stock price, on the other hand, is not a definite number. It’s based on perception. But the problem is, investors’ perception of a stock’s price is as fickle as the latest fashion piece. However, you cannot argue cash flow. It’s real, solid cash. That’s your true floor to any investment. It is like buying a real estate property and renting it out to tenants. You will calculate the cost of buying a house and how much you can earn from monthly rent checks. Generally, you’d not buy an overpriced house if rent checks only give you measly ROI. Finding a business with cash flow to justify its valuation is difficult. It takes extraordinary patience to wait for the right price. But opportunities always exist. Warren Buffett had a big insight when he visited a casino. He saw businesspeople throwing money at betting, even though nearly everybody knows that the house wins. If businesspeople are willing to take such a poor deal at casinos, they’ll also make poor decisions in the business world. Today’s Stock Pick: Cogent Communications Holdings, Inc. (CCOI) Cogent Communications is a stock that can justify its investment through cash flow, which will protect you from any severe downside but also offer a lucrative upside. First, what does Cogent do? Cogent provides high-speed Internet access to businesses and customers, carrying approximately 25 percent of all global web traffic The wireline telecom industry is a cut-throat industry. The product is a commodity, as there’s hardly any difference between competitors. What’s the natural consequence of a commodity business? Price-cutting. So, Cogent deliberately builds its business model to be a low-cost operator. Because of a series of discreet choices around Cogent’s network design, operating strategy and product offering to offer the lowest prices, the company’s cost of goods sold per bit delivered plummeted by about 85% since 2010. In fact, Cogent calls itself the Southwest Airlines of telecom: (Source: Cogent) So, what’s the result of these metrics? Lots of cash returned to shareholders. Cogent has a dividend yield of 6.07%, which isn’t too shabby. What makes it even more attractive is its 47 consecutive quarterly increase in dividends. All in all, the annual growth rate in dividends is 25%. That’s right… Cogent paid $0.39 per share in dividends in November 2014. What about now? Well, it paid out $3.77 per share on August 2nd, 2024. That was about 866% increase in dividends in a decade. Let’s do quick math: The current stock price is $64. Let’s say you bought the stock today. You would earn $3.90 per share in dividends. Now, look what happens if your dividends per share continue to grow 10% per year for a decade. (Just an assumption.) By end of the decade, your dividends per share would be $10.12. If we divide dividends per share by your original purchase price of $58 per share. You’ll be earning 15% annually through dividends only! That’s the power of rising dividends per share. You will not need to invest in a high-risk tech stock. You’d be earning 15% a year with extremely low risk. I don’t think you can easily find an investment like that anywhere. Best of all, Cogent operates in a growing industry. The demand for the Internet will keep growing, with the new technology of artificial intelligence, IoT, virtual reality, and so on. In fact, Cogent’s addressable market grew by 3.8% CAGR since 2010, and it is certain to keep its trajectory. (Source: Cogent) Bottom line: Cogent is a stock that can justify your investment purely through dividends. If you invest now, you’d earn about 5% in dividends. And if you hold for a decade, your dividends can potentially increase to 15% a year if the company keeps raising dividends. That’s a gift you can pass down to your grandchildren. They’ll be looking forward to these dividend checks. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](