One of the simplest ways to make money in the stock market is to find a pattern with a history of repeating, and then exploit that pattern for profits. Today, I'd like to share with you a pattern that proves to be one of the best ways to make money in a down market.
All you have to do is look for companies that recently cut or eliminated their dividend payment, and short them.
The reason why stocks drop is straightforward.
Investors view a company's dividend payment as a barometer of their fundamental health. If a dividend is reduced or eliminated, it's almost always because the company is not only making less money, but should continue to make less money down the road.
Had you shorted Ford after they first cut their dividend payments in September of 2006, you'd be up 41%. You would have been up over 70% if you had shorted National City back in January when they cut their dividend. Clearly, this pattern has been happening for years.
So if you're looking for a good company to short in this bear market, just look for one that recently cut its dividend payment.