On today’s show:
- Jack’s Personal List of Forever Stocks
- 4 Specific Things Jack Looks For In Forever Stocks – it’s NOT what you think!
- One great dividend stock that Jack passed on – and WHY!
- FREE Income play… with complete instructions
What are Forever Stocks?
Jack tells us that his Forever Stocks are part of a bigger puzzle called the Freedom Portfolio.
He created it because he wanted to start living off of dividends and being able to sell covered calls on the same stocks. Plus, he didn’t want a portfolio that he had to trade.
So he came up with the Freedom Portfolio, which basically works like this:
- buy the stock
- reinvest the dividends
- sell covered calls
- buy more stock & repeat
This frees him up from having to look at the profit/loss, like most people do. He doesn’t care. What he looks at is the investment income (dividends), plus the covered call premium.
Jack says that buying a stock and hoping that it goes up so you can sell it is like cutting down your Apple orchard for firewood, even though you need the apples.
Here are the metrics that Jack uses to find his forever stocks:
- it should be able to sustain at least little growth in the stock price
- it must pay a dividend
- the dividend must grow over time (this one is important)
- it must have good covered calls (this requires a stock that has a Beta, also known as volatility, greater than 1)
TheDividendTracker.com lets you check dividends on stocks and ratings. May required a paid subscription for advanced features.
One of Jack’s favorite stocks is AVGO. The stock has grown a lot and it has good dividend growth.
One stock that a lot of people like, because of the dividend is MMM (3M). But Jack hates this stock and refused to buy it.
He says it’s It’s a dying business. They have more lawsuits than any other company Jack has seen. The 5 year chart shows a dying business. Dividend Payout Ratio, as seen on TheDividendTracker.com, shows they are borrowing to pay the dividend. The company is running on fumes.
Jack tells us that looking at any company on a 5 year chart, without even doing any technical anaylsis, will allow you to see if the company is growing or not.
Jack’s list of Forever Stocks:
- AAPL- famous Apple Computer
- ABBV – pharma
- ADM – they are going to run the food business soon
- AVGO – great stock
- EPD – great yield, though the stock doens’t move much
- ET – great yield, though the stock doens’t move much
- JNJ – king of the healthcare market
- KO – Coke, one of Buffett’s
- MCD – McDonald’s, Jack’s longest owned
- O – Realty Income Corp – triple net lease in the real estate business. Tenant has to pay taxes, fix the toilet, fix the building. This one is a REIT, pays the divident monthly. By law has to pay 92% out.
- PFE – Pfeizer, drug companies have tremendous upside
- PG – consumer staples
- XOM – Exxon Mobil – this company will surprise so many people as they move away from fossil fuels
This week’s income play:
PLTR – this stock is in the AI industry and the stock has a beta over 2, so that means it has good options for selling.
The play is a covered call, so we will need to do it in 2 parts:
1) Buy 100 shares of PLTR (roughly $17.25 when Jack checked on it)
2) Sell to open Nov 24 18.5 Call (this will get you roughly $1.10 in premium when Jack checked on it)
It’s nice to find a stock under $20 that is not dying that has a good beta and PLTR is that stock.
If you do a play like this roughly 11-12 times a year, and get called out, that’s the big win.
The profits are huge when you sell a couple of covered calls, reduce your cost basis dramatically and eventually get called out.
Viewer Al asked in the chat: “Would you be buying any of these [Forever Stocks] now or wait for a pull back or the Big One… recession?”
Jack said he is not expecting a recession, but regardless, he is not trying to time the market. He says he would get started right away.
As long as you are selling covered calls, you are lowering your cost basis.
By the way, here’s another short video where Jack shared his Forever Stocks. They are the same stocks mentioned above, but you might hear him give a little more detail on the stocks and why he likes them.
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— The Jack Carter Trading Team
