"Gambling, smoking, and eating Big Macs. That's the theme," says Simon Baker, CEO of Baker Avenue Asset Management. It sounds like a line from a country music song, but it's actually an encapsulation of the hedge fund manager's current investment strategy. "They're not really sexy names, but when you are in a very emotional market you want mega blue chips that pay dividends."
Baker points out that 22 of the 30 stocks that make up the Dow Jones Industrials currently pay a higher dividend yield than the 10-year Treasury. While Baker concedes that "Prius drivers probably won't like these ideas" he also knows that when times get tough, people look for affordable comfort or what he calls"happiness vices."
And few companies can do that better then McDonald's (MCD). It's a stock Baker thinks can go to $100 a share, that he'd bail out of if it slumped to $82 a share. It also pays a 2.8% dividend. "They're also looking to open store a day in China" with the goal of having 2000 stores there by 2013.
On his previous visit to Breakout in May, Baker said he was done buying Chinese-domiciled stocks and was doing all of his "China plays" via multi-nationals. Therefore he still likes Yum! Brands (YUM) and Wynn Resorts (WYNN) mostly because of their ability to deliver counter-trend performance at a time of weakening economic growth.Read More »from Buy Recession-Proof Vice Stocks: Simon Baker