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Akaralph
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Semi-retired consultant residing in beautiful northeast Georgia. Over 40 years of responsible experience in planning, finances and investment management. Primary focus is on portfolio development for retired (or nearly retired) individuals who do not possess great wealth. The Protected Principal... More
  • Safe Havens In An Unstable Market 2 comments
    Feb 28, 2010 11:56 AM
     While I continue to look for a significant market decline (perhaps back to the March 2009 lows - or even worse), I continue to look for so-called safe havens in which to park a growing cash position.

    For the present it is looking more and more like we could have a sideways market until such time as the economic conditions catch up and adversely affect global and domestic markets. In this type of scenario, I continue to favor the energy MLP's (midstream assets, and limited exposure to some upstream operations), and income-producing closed-end funds.

    Specifically, I am focusing on the following:

    MLP's:

    Following recent quarterly performance data, several of the pipeline MLP's stood out from the standpoint of increasing distributable cash flow and distribution ratios. EPD continues to increase their distribution and offers positive guidance going forward, and I would look to add to existing positions on any drop to the $30 area. While ETP did not raise their distribution, the numbers released seem to favor a resumption to distribution increases in 2010. PSE also is on my watch list, and I believe it is a buy closer to the $20 level. While I remain very pleased with the recent performance of PVR, I am looking more and more at buying shares of PVG, the general partner. Any more into the $15's would trigger an entry position.

    Looking at the upstream MLP's I continue to favor ENP, VNR and LINE on pullbacks. All are well-positioned to move up commensurate with oil and NG prices.

    Other MLP's and royalty trusts that I continue to like include NRGY (propane), CQP (the nation's major LNG terminal) which recently reaffirmed their distribution of $1.70 through 2010, and WHX which continues to pump out heavy distributions.

    Closed End Funds:

    I have recently evaluated all of the 660+/- CEF's, looking for those with an unblemished history of positive returns, and those in sectors that I believe are favorable going forward. I presently believe that relatively safe plays exist with CEF's trading at a discount to NAV and paying upwards of 8%. I am particularly drawn to those representing global income, currencies, convertibles, emerging market debt, and to a lesser extent high yield bonds. 

    MIN, a global income fund, while paying out monthly dividends that are a return on capital has never had a down year going back to the early 2000's. This includes positive market price increases in 2008. It presently trades at a slight premium and yields about 8.6%.

    JGT continues to be a favorite currency play, trading at a steeper discount and paying just under 10%. Although not a CEF, I continue to watch MERKX a mutual fund focusing on hard currencies.

    Should the markets become range-bound, CEF's holding convertibles usually are good performers. In this area I continue to watch AGC at a discount of 6.6% and yielding 9.7%.

    Emerging market debt, while a touchy sector offers what i consider a good opportunity with EDD. EDD trades at a significant discount (13.3%) and presently yields close to 8.5%. What I like about this CEF is that their positions are denominated in the currencies of foreign nations. Of a similar nature is AWF, perhaps my favorite here. AWF is a global, multi-sector fund, and sells at a discount of just over 3%, with a yield of 8.9%. Its positions are also denominated in non-U.S. currencies.

    Finally, MHY offers what I consider to be a good opportunity in the presently maligned area of high yield bonds. It trades at a premium to NAV and yields 10.4%, so I would hold off on this one until the premium dissolves.

    While I do not own all of the above, I believe that when combined with cash holdings, these represent good opportunities for a superior income stream in uncertain times.




    Disclosure: I am currently long EPD, PVR, ENP, NRGY, CQP, WHX, MIN and JGT
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Comments (2)
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  • hillbillyharry
    , contributor
    Comments (12) | Send Message
     
    Thank you your informative article. I will research each of the issues presented.
    I currently have a position in MGU- it is our savings account. I also desire more breadth- a different latitudinal base.
    I favor multiple currency presence, a mixture of sectors.
    Macquarie issues are suitable, but one needs to seek variety.
    Seems like one is down, another is up
    Any suggestions?
    28 Feb 2010, 12:32 PM Reply Like
  • Akaralph
    , contributor
    Comments (1882) | Send Message
     
    Author’s reply » Not a fan of MacQuarie's funds, stocks or anything. Their stock tumbled badly, and I do not think their finances are particularly strong - just my opinion. Tortoise has a new power and infrastructure CEF - TPZ. I follow it, but do not own any at this point. ATLIF.PK is a Canadian power stock with holdings in the states also. I own it in the $6's, so a little rich right now, but bears watching to buy on pullbacks.

     

    Axel Merk's mutual funds are pure currency plays. merkfunds.com
    28 Feb 2010, 12:56 PM Reply Like
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