5 High-Yield Stocks Trading Well Below Book Value

Brett Owens, Chief Investment Strategist
Updated: December 23, 2015

The fat yields on business development companies (BDCs) just got even fatter.  Many annualized yields are now north of 10%, but that’s not thanks to a surge in payouts. Rather, it’s a byproduct of plummeting prices.

BDCs loan money to private companies. Many of the loans are floating rates, so the recent rate hike wasn’t the issue. Investors’ broader concern – and reason why many BDC stocks crashed by more than their annual dividend in a week’s time – is borrower risk.

Regular readers know we’ve been keeping an eye on the free-fall in high yield bonds. Of late, that’s accelerated.

High Yield Gets Smacked Down

High-Yield-Chart

BDCs earn their high returns by issuing high yielding loans. …
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This Stock Could Yield 5.2% In 2016

Brett Owens, Chief Investment Strategist
Updated: December 21, 2015

If you want to double—or even triple—your dividend income overnight, there’s an easy way to do it: seek out companies that regularly pay special dividends.

Management usually announces these one-time payouts (which are always larger than regular quarterly dividends) after reporting a blowout quarter, or if they suddenly find themselves sitting on a ballooning cash pile. And with S&P 500 firms holding onto a combined $2.1-trillion stash, special dividends are becoming a lot more common these days.

They can instantly turn a company with a ho-hum dividend yield into an income investor’s dream.

Microsoft (MSFT) famously paid out a $3.00 special dividend in November 2004 that amounted to $32 billion from its long-term money pile. It signaled the company’s shift from a growth stock to a dividend and income investment. …
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2 REITs To Profit From Baby Boomers

Brett Owens, Chief Investment Strategist
Updated: December 18, 2015

Baby boomers are retiring in incredible numbers – 10,000 a day according to Social Security eligibility. A large majority of these are flush with the dual rewards of stock market investments and Social Security income.

But like death and taxes, growing old is an eventuality that we all must face. The details of how long we live – and where we do it – are as much dependent upon our health as they are money.  The one thing we can say for sure is that it’s not getting any less expensive to live longer.

It’s why the senior housing industry and these two REITs – Welltower (HCN) and Ventas  (VTR) – are permanently attached to my watch list.

Senior Living’s Greatest REITs

The real question has been whether or not the Great Recession hurt the boomers enough to delay their retirement. …
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10 Dividends About To Get Cut

Brett Owens, Chief Investment Strategist
Updated: December 16, 2015

Dividend darling Kinder Morgan (KMI) just reminded us why we need to know what’s funding that payout we love receiving every quarter.

KMI investors who didn’t see the dividend cut coming were flying blissfully blind. Everyone else, meanwhile, saw the business problems from a mile away. They sold the stock down 58% in the six months prior to the actual announcement…

This is the problem with “first-level” income investing. We can’t just buy a stated dividend and trust that it will be there next quarter. Instead, we must employ more nuanced second-level thinking to look beyond the obvious. This way, we can buy bargains the market is missing… and avoid time bombs like KMI.

I’ve got some high yielding bargains that I’ll share with you in a bit. …
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2 Insurance Stocks Raising Healthy Dividends

Brett Owens, Chief Investment Strategist
Updated: December 14, 2015

Who gains the most from the Federal Reserve’s (almost certain) rate hike this week?

Banks are one lucky group: if interest rates keep rising next year—as I expect they will—they’ll reap a windfall on loan interest. (Last week, we looked at my three favorite banks to buy now.)

But there’s another group poised to gain as rates arc higher next year, and hardly anyone has mentioned them. I’m talking about insurance companies.

A Screaming Bargain

There’s a direct link between rising rates and insurers’ profits.

Insurance companies are constantly investing the premiums they collect in, among other things, government and corporate bonds, and yields on those bonds rise with the federal funds rate. Those higher yields fatten insurers’ net interest margins, or the difference between investment returns and claims paid out to policyholders, resulting in higher profits. …
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A Stock With A 6% Dividend AND 50% Upside

Brett Owens, Chief Investment Strategist
Updated: December 15, 2015

Last week, we learned that casino mogul Steve Wynn increased his stake in Wynn Resorts (WYNN) almost 10% by purchasing 1 million additional shares from Dec. 4th to 8th.

The move sent his stock up over 13% on the day. It also boosted Las Vegas Sands (LVS), MGM Resorts (MGM), and Melco Crown Entertainment (MPEL).

His purchase might be an indication that the industry isn’t as busted as many have thought.

The Casino industry has had a tough year. The industry’s golden goose –Asian gambling Mecca Macau – was seriously hurt by Chinese travel and currency restrictions from June 2014. From a peak of $45.1 billion in 2013, revenue has plunged to $22 billion year-to-date (YTD) in 2015. Casino operators have been forced to cut costs and increase their operating efficiency or else. …
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3 Stocks Buffett Wishes He Could Buy

Brett Owens, Chief Investment Strategist
Updated: December 9, 2015

On Monday, we reviewed Warren Buffett’s favorite bank stocks. No surprise, they’re all large caps – Uncle Warren has to invest a lot of money for any returns to matter, after all.

His “problem” of having too much cash to deploy is not one that keeps me up at night. But Buffett did once famously say that he’d earn 50% per year investing in smaller companies if he were only managing a few million bucks. So let’s talk about the banks he’d love to buy if he could.

Most sub-behemoth banks have relatively straightforward business models – focused on banking, of all things. They borrow short and lend long. Higher interest rates are going to help their profits, because the banks will be able to loan out their cash to customers at higher rates. …
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3 Stocks to Buy Before Fed Raises Rates

Brett Owens, Chief Investment Strategist
Updated: December 7, 2015

You can take it to the bank: the zero-interest rate era will soon be dead.

That’s bad news if you have a hefty credit card balance, but it’s terrific if you invest in bank stocks. And now is a great time to do so.

That’s not just my opinion. Some of the country’s smartest investors—including Warren Buffett himself (see below)—share it. They’ve bulked up their bank holdings lately, and it doesn’t take a stock-market genius to connect that to a rate hike the market sees as 78% certain at the Federal Reserve’s December 16 meeting.

Let’s be honest, a one-off, quarter-point increase won’t mean much for bank profits. Luckily (for bank investors), that’s not likely to be the case. Goldman Sachs (GS), for example, feels the economy is strong enough to handle more; it’s forecasting a quarter-point rise in each quarter of 2016. …
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Book 60% Gains in 2016 With These Black Friday Winners

Brett Owens, Chief Investment Strategist
Updated: December 4, 2015

It’s been a rollercoaster start to the holiday shopping season. What started as a muted Black Friday transitioned into one of the best Cyber Monday’s of all time as consumers eschewed early morning in-person purchases for mobile shopping.

Looking at results from the combined weekend, the National Retail Federation expects U.S. Holiday shopping to increase by 3.7%. Underperforming retailers like Sears and Kmart from Sears Holding Corp (SHLD) are going to have a tough time explaining poor results when competitors booked huge returns.

On Cyber Monday Target Corporation (TGT) had their website crash with the surge in online traffic – ahem, I mean they “metered traffic” as their spokespeople said.

Target’s online traffic was twice as high as its busiest day ever. That’s pretty remarkable.


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Yellen To Crush Fixed Rate Bonds In 2 Weeks

Brett Owens, Chief Investment Strategist
Updated: December 2, 2015

Worried that rising rates are going to hurt some of the bonds you own? If so, you’d better move some of your fixed-rate bond money into “floating-rate” issues.

As I write to you on this first Wednesday of December, traders are handicapping a 78% probability that the Fed will boost rates in two weeks. Overall they’re projecting a half-percent increase between now and June. And renowned government insider Goldman Sachs is a bit more aggressive – it’s projecting a full percentage point of tightening.

A 0.5% – 1% move would be plenty big to pancake many bonds.

The Fed last began a new rate-raising cycle at the end of June 2004 (yes, it’s been over 11 years). Over the ensuing three months, the 10-Year Treasury Note plummeted 10. …
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