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Dec. 28, 2013, 8:30 AM
- A tripling of the market over the last five years has made it a difficult environment for value investors looking for ideas, writes Tsachy Mishal; difficult, but not impossible. Mishal has recently put money to work in four new investments:
- Air Products & Chemicals (APD) has a lot more in common with Bill Ackman's successful moves than it does with boners like J.C. Penney and Herbalife, says Mishal. The appointment of a CEO in Q1 should be a catalyst, he says, as the new chief lays out his strategy and Ackman makes public his detailed investment thesis.
- Trading at a steep 20% discount to book value, Annaly Capital (NLY) is the victim of year-end tax-loss selling and the fear of the effect of higher rates on book value, says Mishal. But the year is nearly over, and Annaly management has lowered leverage, hedged its book, and diversified into CMBS - it's well-positioned against further rate increases.
- Eastman Chemical (EMN) has spent the past few quarters paying down debt from an acquisition, says Mishal, but starting in Q1 should begin using its ample cash flow to aggressively buy back stock. Management has an EPS goal of $7 in 2014 and $8 in 2015, and is on the record as saying acquisition targets are too expensive. That leaves share repurchases. Against his long in Eastman, Mishal is short ALB, CE, DD, DOW, and FMC.
- Municipal bond closed-end funds are getting it from both sides - fears of higher rates and credit worries. Throw tax-loss selling into the mix and many are now trading at near-10% discounts to NAV and yielding almost 7% - the taxable equivalent of over 10%. "Municipal bonds offer the best after-tax, risk-adjusted return of any asset class." He's long: NRK, VMO, VKQ, PMO, NAN.
Aug. 13, 2013, 12:44 PM
- Tumbling Treasury prices - with TLT carving out a new 52-week low today - are again hitting income favorites.
- Leading mREITs (REM -1.4%) lower are Invesco (IVR -3.3%), Annaly (NLY -2.3%), American Capital (AGNC -2%), and Western Asset (WMC -1.6%).
- A number of income CEFs not long ago were so much in favor they commanded large premiums to NAV. They're now at seemingly growing-by-the-day discounts. Among the movers today is the Pimco Dynamic Income Fund (PDI -1.4%) selling for $27.45 against yesterday's closing NAV of $30.23. Others include: PCI, PFN, and PFL.
- Still trading at premiums to NAV are the Pimco High Income Fund (PHK -0.9%) and the Pimco Corporate & Income Fund (PTY -1.1%).
- Municipals (MUB -0.6%) slip as well, hitting Muni CEFs: NXZ -0.9%, IIM -1.2%, VKQ -0.7%.
- Related ETFs: MORT, MORL, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY .
VKQ vs. ETF Alternatives
It invests primarily in investment grade U.S. municipal bond obligations. It seeks to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. Up to 15% of its net assets may be invested in inverse flo
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