3 Buys That Crush Bitcoin And Yield Up To 8.2%

&l;p&g;&l;img class=&q;dam-image getty size-large wp-image-944640416&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/944640416/960×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; (Photo Illustration by Thomas Trutschel/Photothek via Getty Images)

I know I don&a;rsquo;t have to tell you that there are a ton of so-called experts out there &l;i&g;dying&l;/i&g; to tell you why bitcoin, ripple or some other cryptocurrency is a surefire way to get rich.

Too bad they&a;rsquo;re all wrong.

If you&a;rsquo;ve been reading my columns on &l;em&g;Contrarian Outlook&l;/em&g;, you know I issued &l;a href=&q;https://contrarianoutlook.com/bitcoin-or-stocks-heres-the-one-to-buy-in-2018/&q; target=&q;_blank&q;&g;a dire warning around Christmas&l;/a&g; that bitcoin&a;rsquo;s promises were hollow, meaning the bubble was going to pop. &a;ldquo;The truth is, bitcoin is actually the &l;i&g;least&l;/i&g; private currency in existence!&a;rdquo; I wrote, dismissing bitcoin&a;rsquo;s biggest appeal for speculators.

But I had a bigger worry: would a burst bitcoin bubble wipe out tech stocks, too?

Up till early February, that looked to be the case. Look at bitcoin versus the &l;b&g;AdvisorShares New Tech and Media ETF&l;/b&g;, which specializes in the biggest tech companies out there, like &l;b&g;Facebook, Alphabet&l;/b&g;, &l;b&g;Amazon &l;/b&g;and &l;b&g;Netflix&l;/b&g;.

But that&a;rsquo;s all history now.

In the middle of March, &l;a href=&q;https://contrarianoutlook.com/this-weird-unicorn-delivers-8-8-dividends-and-huge-gains/&q; target=&q;_blank&q;&g;I told readers that&l;/a&g; the &a;ldquo;tech bull keeps running,&a;rdquo; thanks to growing earnings that were likely to continue.

And they have.

So far, tech profits are up 31.8% from a year ago. Only two sectors have beaten tech: energy and materials, which is a result of rising commodity prices. No other sector&a;mdash;not even financials, which are getting a huge boost from the Fed&a;rsquo;s interest rate hikes&a;mdash;comes close.

But there&a;rsquo;s one crazy thing about this earnings surge&a;mdash;the stock market is &l;i&g;very&l;/i&g; slow to price this good news back in.

Take, for instance, Facebook, whose earnings were &l;i&g;way&l;/i&g; ahead of forecasts and up a whopping 62.5% from the prior year. Yet the stock is still down 1.5% from the start of 2018, driving its P/E ratio down to 25.5. It was 34 a year ago.

Sure, much of that has to do with the Cambridge Analytica fiasco, but you can spot this trend across tech, despite its absurdly high profits. This means if you aren&a;rsquo;t into tech, you still have time to get in.

But what&a;rsquo;s the best way to grab some upside (and income) here?

Of course, Silicon Valley is crawling with venture capitalists looking for the next &a;ldquo;big thing.&a;rdquo; But figuring out what that will be is tough, if not impossible, for the average investor. So we&a;rsquo;re not going to win this game by trying to pick and choose winning companies from the sidelines.

We need to diversify. And that means buying a tech fund.

There are a couple ways to do this. One is to get a &a;ldquo;dumb&a;rdquo; index fund, like the &l;b&g;Powershares QQQ ETF&l;/b&g;, which mimics the Nasdaq 100. Or you could get the &l;b&g;Technology Select Sector SPDR ETF&l;/b&g;, which aims to hold all the tech stocks in the S&a;amp;P 500.

There&a;rsquo;s nothing wrong with this approach, but there is one big missing piece: income.

Both of these funds pay almost nothing in dividends (less than 1% between them), which means you&a;rsquo;ll need to watch them like a hawk and rebalance when they get overvalued. And then there&a;rsquo;s the real risk you&a;rsquo;ll get it wrong.

Alternatively, you can have the pros do the hard work for you.

&l;b&g;3 Great Ways to Play Tech&a;mdash;and Pocket Cash Dividends Up to 8.2%&l;/b&g;

There are a few closed-end funds (CEFs) that specialize in &l;i&g;only &l;/i&g;tech stocks&a;mdash;while also paying a juicy dividend yield.

(If you&a;rsquo;re unfamiliar with CEFs, &l;a href=&q;https://contrarianoutlook.com/why-you-need-to-invest-in-closed-end-funds/&q; target=&q;_blank&q;&g;click here for a quick, easy-to-read primer&l;/a&g; on these incredible income plays, which routinely throw off safe dividends of 8% and more.)

One great option is the &l;b&g;BlackRock Science and Technology Fund&l;/b&g;, which pays a 4.9% dividend, but its best quality is that its managers are strategic in buying and holding stocks when they&a;rsquo;re ideally priced and selling them when they get pricey. The end result has been outperformance&a;mdash;BST is ahead of both QQQ and XLK since its inception in 2014.

Another option is the 8.2%-yielding &l;b&g;Columbia Seligman Premium Technology Growth Fund&l;/b&g;. It&a;rsquo;s popular not only because of its juicy income stream but also its history. STK has been around since 2009, so it has a longer track record than BST. There&a;rsquo;s only one downside&a;mdash;it&a;rsquo;s been lagging the indexes by a pretty big margin.

A big reason for STK&a;rsquo;s lower return is the bigger dividend&a;mdash;in order to sustain that big income stream for investors, STK had to take more money out of the tech market to keep payments to shareholders. Inevitably, the profit-taking to sustain dividends resulted in lower profits over the long term, resulting in STK&a;rsquo;s underperformance. If that doesn&a;rsquo;t matter to you as much as the income stream, STK might be worth considering.

But I&a;rsquo;d also suggest the &l;b&g;Nuveen NASDAQ 100 Dynamic Overwrite Fund&l;/b&g;, which mimics QQQ but with a 6.5% dividend. Unlike STK, QQQX has beaten the dumb funds for a long time, despite being a bit older (it came out in 2007).

This big income stream and strong long-term returns have a price, however; QQQX is a bit expensive, trading at a 13.6% premium to NAV (net asset value, or the market value of its portfolio), so you&a;rsquo;ll need to pay more than a dollar for a buck&a;rsquo;s worth of assets. But if you want a steady income stream and don&a;rsquo;t want to worry about timing your tech bets, QQQX might be right for you.

Disclosure: none

&l;!–donotpaginate–&g;&l;/p&g;

Leave a Reply

Your email address will not be published. Required fields are marked *