A Pandemic-Fueled Trend Led Me To This Quick Income Trade…
Life is certainly different than it was a year ago. Many of the changes the pandemic brought will affect our lives and our investments for years.
Some of the changes were accelerations in existing trends. Other changes are new trends that are important for investors to consider.
We’ve discussed several of those trends over the past year, from work-from-home to the media streaming wars to gaming stocks, healthcare, and much, much more.
But one trend we haven’t spent a lot of time on that’s pretty major is that people are moving away from large, densely populated cities to less urban areas.
An interesting chart showing this trend is below.
Source: MyMove.com
This trend is significant, and it will have a long-lasting impact for years to come if it holds. We’ll save the deeper ramifications for another day. For now, let’s think about the investible angles.
The investing trend I see in this chart probably isn’t obvious to everyone. Sure, those people are looking for homes in these areas – so the homebuilders are an obvious candidate. But someone moving from New York or San Francisco to Katy, TX or Meridian, ID is also probably going to need to buy a car to get around in their new city.
That fact could, along with pent-up demand, could explain the rapid recovery in auto sales.
Source: Federal Reserve
How I’m Playing This Trend
This trend should be bullish for auto manufacturers. But my concern with buying an automaker is finding the winner in that market. Maybe consumers will abandon gas-powered cars for electric vehicles in the next few years. Or maybe legacy manufacturers will create products that are more attractive than the vehicles from new manufacturers.
In the end, it’s anybody’s guess. So to mitigate this, I focused on finding a pick that would make for a safer trade than the manufacturers and is likely to be a winner no matter what.
This led me to Magna International Inc. (NYSE: MGA). As you’ll see in a moment, it turns out MGA is a compelling income play for investors and traders alike right now…
MGA makes auto parts for the major manufacturers. This makes it a safer trade than any individual manufacturer since MGA can benefit from cars sold by almost any automaker. The company also has exposure to electric vehicles through a partnership with Fisker to help build Fisker’s Ocean SUV, which is scheduled to start production later this year.
The stock is reasonably valued and offers a dividend yield of almost 2%. Now, I realize that’s not a lot to write home about. But thanks to the strategy we use over at Maximum Income, we can do much better…
Last week, MGA announced that it was increasing its quarterly dividend to $0.43 per share. By buying now, we will qualify for that dividend.
By using our strategy to make a short-term income trade on MGA, we can also benefit from the high level of volatility we’ve been seeing in the market recently.
If everything goes according to plan, our strategy will not only allow us to collect MGA’s next dividend payment, but also earn a quick “bonus” payday from our position.
The trade should only last about 22 days at most. And what’s more, we can make trades like this again and again. This allows us to take a stock that only yields about 2% a year and earn much, much more over the course of a year.
Closing Thoughts
In this market, it’s more important than ever to stay on top of the changes that are rapidly taking place. You need to be flexible, looking beyond the obvious trend so that you don’t get left behind. The last thing any of us wants is to head into retirement feeling like we don’t have what we’ll need.
Now, I can’t give away all the details of this trade, since it wouldn’t be fair to my premium Maximum Income readers. But I send out trades just like this every other week, so you’ll have plenty of opportunities to make trades like this if you decide to give my service a try.
In the meantime, if you want to learn more about how this strategy works, you should check out my latest report, which gives you all the details you need to know to get started.