Dear Mr. Berko: The stock market has recovered tremendously, but we think it will crash again. We have $83,000 to invest for growth and income. We are very nervous but desperately need more income. Two stockbrokers recommend index annuities, and a third recommended six stocks (each enclosed), but if we believe that the market is going to crash again, what should we do? Please advise us.
— S.S., Jonesboro, Ark.
Dear S.S.: Some brokers who think the Dow Jones industrial average will crash pass on fear to investors so they can sell high-commission annuities. Smart brokers consider a market crash to be a buying opportunity, knowing that if the Dow tanks, a Golconda of bargains will abound. And they’ll suggest good-till-canceled orders at prices far below current market prices. A GTC order remains, well, good till you cancel it. For example, a GTC order to buy a stock at $19 while it trades at $25 will be executed only when that stock falls to $19. If you think the market will crash, consider trolling with GTC orders well below current prices; you might hook some beautiful yields. Consider GTC orders on the six stocks recommended by broker No. 3. This is called trolling for treasure.
Seagate Technology (STX-$33.70) is the world’s largest manufacturer of hard drives, and it also provides data storage services for small to medium-sized businesses. The $2.52 dividend, yielding 7.3 percent, may be raised to $2.71 this year. Place a GTC order at $27. If the order were to be executed later on a market dip, the dividend would yield 10 percent. The median target reported by Thomson First Call is $35.
Verizon Communications (VZ-$53.10) is a $139 billion-revenue information and entertainment products company. The $2.26 dividend yields 4.2 percent and may be raised to $2.32 this year. Place a GTC order to buy VZ at $38. With the increased dividend, VZ would yield 6.1 percent. The median target price by Thomson First Call is $51.
