TMFDeej (99.46)

How you can crush the "Income Winners" from this week's Barron's

January 06, 2013 – Comments (5)

Let me begin by saying that I actually like Barron's for the most part.  I wouldn't subscribe to and continue to read it if I hadn't found profitable investment ideas in it in the past.  I can do without the opinion articles, anything they have to say in it about politics, most of the pieces on economics and of course the snooty Penta section, but some pieces particularly the 13D and the interviews with hedge fund and investment managers that contain real ideas are really good.  

I think that the cover story titled "Income Winners" from this week's issue was pretty weak though.  I can find a ton of ideas from my own real-world portfolio that have relatively safe yields that are significantly bettter than the ones featured in the piece.  Let's take a look at it sector by sector and find better choices for investors:

Preferred Stock 

Barron's:

iShares U.S. Preferred ETF (PFF): 5.98%

Wells Fargo 7.5% L: 6.09%

Bank of America 7.25% L: 6.34%

Average: 6.14% 

My Picks:

Evolution Petroleum Corp 8.5% Series A Cumulative Preferred (EPM+A): 7.73%

Pebblebrook Hotel Trust Preferred A (PEB+A): 7.64%

Strategic Hotels and Resorts Inc. Preferred C (BEE+C): 8.28%

Winthrop Realty Trust Preferred D (FUR+D): 8.71%

American International Group Inc 7.70% Series A (AVF): 7.54%

Average: 7.98%

Junk Bonds 

Barron's: iShares iBoxx H/Y Corp (HYG): 6.56%

Mainstay High Yield Corp. (PACIX): 7.11%

Fidelity Capital and Income (FAGIX): 5.88%

My Picks:

Peritus High Yield ETF (HYLD): 8.37%

More individual corporate bonds than you can shake a stick at.  The problem is that I bought most of them during the credit crisis when yields were outrageous and I continue to hold them today.  The yields back then were anywhere from 6% to I'd say 12% or so.  Of course, many of them that were callable are being called back today.  I continue to hold corporate paper for Alcoa, Caterpillar, Corning, Goldman Sachs, Leucadia, Nabors, Reynolds American, JP Morgan Chase, Morgan Stanley and Transocean amongst others.  I'm very happy with the fund that these bonds provide me with.  I can turn around and invest the money in new, interesting ideas.  Having said that, even with their high yields I have enough bonds acting as an anchor for my portfoio in what has been a bull market.  

REITs 

Barron's

Vanguard REIT ETF (VNQ): 3.52%

Simon Prioerty Group (SPG): 2.59%

Cohen & Steers Realty Shares (CSRSX): 2.53%

My Picks:

Mystery stock (to be announced this week): Around 8%

Retail Opportunity Investments Corp (ROIC): 4.33%

MLPs 

Barron's:

JP Morgan Alerian ETF (AMJ):  5.03%

Alerian MLP ETF (AMLP): 6.06%

Enterprise Products Partners (EPD): 4.83%

My Picks:

Boardwalk Pipeline Partners (BWP): 7.98%

CVR Partners (UAN): likely 9% in 2013, 8.49% now

Dividend-Paying Stocks

Barron's:

Vanguard High Dividend ETF (VYM): 3.16%

Vanguard Dividend Appre. ETF (VIG): 2.31%

SPDR Down Jones Indust. ETF (DIA): 2.48%

My Picks:

Sprott Resource Corp (SCPZF): 10%+

Vodafone Group (VOD): 5.93% + special

Exelis (XLS): spinoff with 3.54%

I own a ton more that pay dividends right around or slightly less than the Barron's picks, but...they all have one or several potential catalysts that have the potential to unlock a ton of value in the future.  

I also have a ton of companies that do not pay dividends right now, but likely will in the future.  One example of this is Lamar Advertising (LAMR), an outdoor advertising company that is attempting to convert into a REIT.  Stocks that are likely to significantly raise their dividends in the future are a great type of special situation.  I made a great return on Macquarie Infrastructure Company (MIC) when it nearly doubled its dividend last year (I think that it was last year).

Anyhow, I guess that the point of this post is, if you're looking for yield you can do a lot better than the recommendations in this week's Barron's cover story.

Thanks for reading everyone.

Deej