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Kate Stalter is a columnist for RealMoney.com, MoneyShow.com and Morningstar Advisor. Stalter currently hosts “The Small Cap Roundup” on TFNN.com, every Tuesday and Thursday at 11 a.m. Eastern. She serves as editor of the “Low-Priced Leaders” newsletter, also at TFNN. From 2001 until 2010, she... More
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  • 2 Emerging Market Stocks Set for Growth 0 comments
    Sep 12, 2011 12:42 PM | about stocks: GS, BRK.A, CPL

    It’s worth investors’ time to check out lesser-known opportunities in Thailand and Brazil, Neil George of The Pay Me Strategy tells MoneyShow.com. Corporate bonds of US-based financials can also offer hidden gems, he says.

    Kate Stalter: We are speaking with Neil George. You can find him at Paymestrategy.com. Neil has a wide background in the financial services industry. He has been an investor, an asset manager, and an author.

    Tell us what specific action individuals should be taking right now. What should they be putting on a watch list, or anything they should be buying or selling in particular?

    Neil George: Well, in general terms, much of the volatility that we have seen in the marketplace—those gut-wrenching, up-and-down swings, particularly the down swings—has people questioning some of their longer-term holdings. People need to be sitting back and examining each one of their individual holdings and thinking of them, as far as being individual positions, rather than getting caught up in the general marketplace.

    Then, from there, the idea you want to start focusing on is the companies that are going to be successful, regardless of what happens in the general marketplace.

    Kate Stalter: Anything in particular standing out right now, as far as individual companies, or even asset classes or global regions?

    Neil George: The key thing is, you should look at companies that are able to cash in on their own particular situation...and more particularly, companies that are also generating a lot of cash, and pay that cash to the shareholders in the form of a larger dividend.

    The key example of that would be looking at some of the individual Asian markets in which you still see higher rates of growth, you don’t have credit problems, and you are not seeing governments under sort-of fiscal duress. So an example might be Thailand, one of my continuing favorite high-growth economies in that part of the world.

    One of the leading companies is a communications utility company called Advanced Info Service (AVIFY). It pays about a 10% dividend on an ongoing basis, and trades for about $4 a share. Again, it is one of the leading communication companies in a high-growth marketplace.

    Kate Stalter: That is an interesting name that I am sure a lot of investors will not be aware of. Anything else along those lines that people should check out, that they may not know about at the moment?

    Neil George: Well again, keep thinking about markets that are separate and distinct from the US and Europe, that are able to basically thrive on their own. So another market that people might be a little more familiar with, because it is getting a lot more attention, is one of the BRIC countries, that is Brazil. Brazil is obviously very resource-rich, doing quite well as far as producing exports on those resources.

    A lot of people have been focusing on some of those resource companies, but again, think about the utilities—sort of like the yeomen of anyone’s retirement portfolio.

    A great example would be one of the leading power companies down in Brazil. It trades on the New York Stock Exchange, and the name is CPFL Energia (CPL).

    This pays about 6%...but again with the real, the currency of Brazil, doing very well against the dollar, you should expect to see a much higher net return. This is again something separate and distinct from what we are seeing in general, both the US and European markets.

    Kate Stalter: How about areas that investors should steer clear of? One that comes up a lot, obviously, is the financials. Anything else that comes to mind as areas to avoid at the moment?

    Neil George: I think things to avoid would be some of the highly aligned companies that are part of the S&P 500. Try to stay away from some of the index-type plays...and in general terms, stay away from some of the larger, big capitalized companies of the US and Europe. They are the ones that are continuing to see some of these ongoing problems.

    But lastly, you did mention about financials. At the same time, you want to avoid the common stocks with the financials, you might want to start looking at some of the preferreds and the bond issues of some of the banks, particularly the large ones in the US.

    Even though the common-stock people are going to be seeing some further pain, with the US government focusing very, very strongly on increasing the balance sheets of these banks, they are going to have greater potential to be able to make their dividend payments on the preferreds and also on the bonds. That might be one way to keep the cash flow going, but kind of staying out of the general market.

    Kate Stalter: Any particular banks where you have been looking at the preferreds, or some of the corporate bonds, that might be worth some research?

    Neil GeorgeBerkshire Hathaway (BRK.A) actually made significant investments in some of the larger banks’ preferreds and some of their bonds. So you might want to look at what Warren Buffett has bought.

    Bank of America (BAC) has a bond issue that trades as a preferred on the New York Stock Exchange. That symbol is IKM, and it pays in the 6% range. Again, it is a very, very steady performer.

    So you want to avoid the common stocks of the financials like you mentioned, but again, think about some of the preferred and A Bonds. You can see basic yields in the 6% to 7% range.

    Another one to look at would be for Goldman Sachs (GS); the symbol is JVS, again, on the New York Stock Exchange. It came in in the mid-6% range, and it’s a very, very steady performer, even though the common stocks of both of those banks had been battered quite severely.

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