SouthShore

Saut: It's Time to Reduce 'Stuff' Stocks, Buy High Yielders

The credit dislocation has shaken investors, period. As such, many investments are on sale. In a sideways market yield is king.

Look at the US energy MLP's as they offer an attractive tax-deferred current yield with the all-important distribution growth that protects against inflation.

Closed-end funds holding MLP's are best for IRA's or for the K-1 averse. Look at FMO, which has avoided the use of auction rate securities that similar CEF's have had issue with recently.

Linn Energy has a stagnant 11% yield, as hedges limit upside while protecting the distribution. This is generally true for most MLP-E&P's. Nice double-bottom recently as the last of the PIPE shares have been dumped by CEF's/hedge funds getting margin calls. However, I wouldn't look for significant unit appreciation soon. They continue to monetize assets that are poor choices for the MLP structure and recycle the cash. Linn's only downside is that they give up the potential home run deep shale plays that XTO, etc., benefit from.

ALSK is an Alaskan telecom with wireless operations. AT&T bought into the Alaska market and thus ALSK's moat has narrowed. ALSK hasn't increased its dividend and thus is losing my interest.

Also, the BDC's such as American Capital (ACAS) will become attractive investments coming out of the credit/recession. ACAS has a 12-13% yield typical for the group now, and their yields will return to the 8% range in a year. The level 3 assets held by BDC's (since they invest in private companies) have been attacked by the shorts such as Einhorn, but then they are biased! The shorts attacked BDC's at least twice prior and their charts and dividend growth tell the real story. Even ALD, Einhorn's favorite target shrugs off the shorts after decades of being a public company.

Just a few thoughts.

*I am long the BDC ACAS, and LINE & many other MLP's.
**FMO is a potential holding for an elderly parent's portfolio and likely will replace ALSK as a holding.