Separating Real News From Fake News In The Stock Market
For an investor trying to build wealth, the massive amount of news coming out of the financial media can be contradictory and confusing. Investors sometimes don’t realize that there are two sides to every stock trade. The seller doesn’t want to own the shares for a range or reasons, and the buyer does so with the belief that the share price will go up. One key to success is to understand which financial news is “real” and which is rumor or opinion, and thus “fake.”
Here are some tips that help you decide whether the stock market information you are hearing, or reading is actual, useful information, or is something we can drop into the “fake news” file.
- Real News: Information provided directly from the company behind the stock. The best of these are the quarterly and annual earnings reports. Income statements and balance sheets give accurate pictures of how a company is operating. Also useful are press releases on other topics and management comments during conference calls and Q and A sessions.
- Fake News: Short term market reactions and financial news comments about an earnings report. Wall Street analysts generate earnings forecast that are just estimates, and the stock market treats those estimates like hit or miss targets. Also, in the fake news category are company analysis articles. They can be useful to get an educated opinion, but they are not a substitute for doing your own analysis.
- Real News: Dividend payments. Dividends are a cash return on your investment that cannot be clawed back. Dividends are how a company shares profits with shareholders. If a company can grow profits, it will also grow the dividend payments. Looking at history and monitoring continued dividend payments are a great way to monitor a company’s financial success.
- Fake News: Counting on share price gains as sustainable profits. It can be surprising how quickly a stock that shows as a profit in your brokerage account can drop and wipe out your gains, and even go to a loss. The challenge of counting on share appreciation to fuel your income returns is that at some point you need to find another investor willing to buy your shares at a higher price. Trying to pick tops and bottoms in the stock market and share prices is a very difficult, if not impossible, way to build and sustain wealth.
- Real News: To build wealth or sustain a nest egg to last for decades, you need an investment strategy that will work through the stock market cycles. This means being ready to manage and invest during corrections and bear markets as well as when stocks are going up. In my newsletters, I discuss strategies focused on building a dividend income stream. Whatever system and strategy selected, you should know how you are going to handle the periods when stock values are falling.
- Fake News: Hot tips and get rich quick offers are designed to separate investors from their money and not to help them actually succeed in reaching their investment goals. Think about this: If someone has a system that will turn a few thousand dollars into millions, why do they need to sell it?
The bottom line to this discussion is that successful investing for the long term will be based on fundamental analysis of the companies behind the shares. Dividend history and payments are a great way to track how well a company is doing, and an attractive yield is a great return in itself. Here are a couple of stocks currently out of favor with the market with great long term potential.
Tanger Factory Outlet Centers, Inc. (NYSE: SKT) is a pure play owner of outlet style shopping centers. It is the only REIT focused on this type of retail space. Tanger has increased its dividend rate every year since the company’s 1996 IPO.
The recent “fake news” about the end of brick and mortar retail has driven the SKT share price down to around $20, compared to a high over $41 two years ago. The company is financially conservatively managed, and at some point, will resume a growth trajectory. Right now, value oriented investors can pick up shares with a 6.4% yield and annual dividend increases.
History shows that REITs will again be a top performing sector, and when that happens Tanger will be a great stock to own.
LTC Properties, Inc. (NYSE: LTC) is a healthcare sector REIT. Healthcare commercial real estate is another sector currently out of favor with the investing public.
I recommend LTC as the most conservative financially managed company out of all the healthcare REITs. This approach will allow LTC to stay the course through this down period and be able to generate superior total returns when financial for healthcare real estate turn positive.
This is a sector where the long term prospects are very positive. While you wait, the stock pays a 6.5% yield and monthly dividends.
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Category: Stocks
