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The Amalgamator
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I am a financial professional who is passionate about personal investing. My portfolio includes public and private investments such as stocks, options, bond ladders, ETFs, mutual funds, hedge funds, and commodities. I view ideas through a contrarian lens using fundamental analysis, behavioral... More
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  • Summer Snack: Investments To Nibble On When You're Not Quite Hungry

    It's hot out and the markets seem wobbly and dehydrated, too tired to face nasty geopolitics and the volatility that nags at our aging bull. You too may have no appetite to adjust your portfolio and simply want to do nothing. You may not be hungry, but consider a serving of oversold companies offering the most nutrition per dollar. Focus on price setters, not price takers, in industries with the best future backdrop. Most importantly, demand companies with decent valuations and fundamentals that have less rigid pricing structures and the ability to increase margins (think of situations where customers wake up to their need for the service, without much leverage to negotiate). I like the areas of Hotels, "Real IT," Global Infrastructure and Canadian Energy plays:

    Hotel REITs - The trend for urban migration and tourism is up in a big way, and hotel occupancy and room rates reflect this strength. Some of the trusts operating and financing branded chains on coastal cities have good cap rates, room to grow and the ability to sustain their dividends. Hersha Hospitality Trust (NYSE:HT) runs 46 hotels with 6,900 rooms, including many quality attainable brands such as Marriot, Hyatt, Hilton, and Hampton Inn, as well as a few high-end hotels. It has an adjusted cash earnings yield of around 8.5%, a dividend yield of 3.5% and a great management team. Other names to research include Pebblebrook Hotel (NYSE:PEB) and RLJ Lodging (NYSE:RLJ).

    "Real" Information Technology - I feel less comfortable buying healthcare because the sector has run so far, and I expect bad earnings to come after the Affordable Care Act's promise wears off. A backdoor way to play the expansion of coverage and drive for efficiency, without the government capping profits, is through records and data management. CGI Group (NYSE:GIB) is a Canadian company cross-listed in the U.S. that provides IT consulting and data management to numerous industries including "Healthcare 2.0." It has a 5 Year average Return on Equity of 13.5%, an Earnings Yield above 6% (10%+ when adjusted for non-cash items) and little debt.

    Another IT growth area is "cyber-security" following Target Co.'s data breach and the government's push for financial service companies to shore up the systematic risk imposed by hostile governments and hackers (see OCIE report) . Fortinet (NASDAQ:FTNT) and Imperva (NYSE:IMPV) are more speculative plays, with FTNT having better fundamentals, with IMPV being a future growth story. Each of these tech names provides necessary services and have nothing to do with "selfies," junky content, or senseless online personas.

    Infrastructure - I have owned Brookfield Infrastructure Partners (NYSE:BIP), whose management proves to be excellent capital allocators by acquiring real asset projects across the globe with solid cash flows. Recently, I have been interested in adding more infrastructure names through a diverse basket. Lo and behold, ProShares recently teamed up with the Brookfield on the Dow Jones Brookfield Global Infrastructure ETF (NYSEARCA:TOLZ), which "focuses on companies whose assets include airports, toll roads, ports, communications, electricity distribution, oil and gas storage and transport, and water in both developed and emerging markets." The index excludes construction and engineering, and limits lower-growth and interest rate sensitive Utility companies so prevalent in other "infrastructure" ETFs.

    Canadian Energy - An area related to infrastructure is the Canadian Energy space, specifically due to the U.S.'s inability to sponsor adequate energy transportation systems to deal with millions of barrels and BTUs pouring out of North American sources. Canadian energy producers have been using rail transport as a workaround, but that seems unsustainable over the long term. Without the necessary approvals to bring Canadian fuels south to its largest trading partner through the TransCanada XL and other pipelines, Canada is forced to shift distribution to Asia. Suncor Energy (NYSE:SU) is an integrated energy company operating in Canada's oil sands. It will be a net beneficiary of the Asia expansion as well as any positive movement on pipeline approvals. Investors looking for greater diversification could buy the Guggenheim Candian Energy Income ETF (NYSEARCA:ENY), which includes Suncor and related peers in the S&P/TSX Canadian High Income Energy Index.

    Disclosure: The author is long HT, TOLZ, FTNT, GIB, IMPV, ENY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

    Jul 18 9:44 PM | Link | Comment!
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