These Snubbed Funds Crush the Market and Yield Up to 8.5%

Remember early February’s stock-market rout?

I know. Seems like a weird question. It was just a few weeks ago, after all. But many folks seem to have forgotten how stocks fell 10% from their 2018 high in a matter of days:

Amnesia Sets In

As you can see, the benchmark SPDR S&P 500 ETF (SPY) is already recovering, and stocks are now up 3.3% for 2018. That’s still well below the 8% climb we saw in January alone, but it’s a solid return, and it means more (formerly) skittish folks will likely trickle their cash into stocks, keeping the market buoyant.

But they aren’t putting their money in all sectors equally, and that’s where our opportunity comes in, starting with the 3 closed-end funds (CEFs) I have for you below, which are boasting some of their highest dividend yields ever—up to 8.5%!

What sector am I talking about? To answer that, we only need to look at this heat map of the S&P 500.

Where the Bargains Are

A quick glance tells us that consumer discretionary, financial and technology stocks are far outperforming the rest of the market, with year-to-date returns between 3.5% and 5.9%.

But we’re mainly interested in the red sectors—one in particular. And it’s not consumer staples.

That’s because the consumer staples selloff can best be understood as a “risk-on” move—staples, of course, are things people must buy all the time, so these stocks are attractive in tighter times. And since we’re in a time of growing incomes and falling joblessness, staples aren’t where you want to be.

That means the drop in consumer staples isn’t a great contrarian opportunity—it’s a falling knife. But when we compare ETFs benchmarking two other lagging sectors—the Energy Select Sector SPDR (XLE) and the Utilities Select Sector SPDR (XLU)—a terrific opportunity pops up.

Utilities Go Up, Energy Goes Down—Until Now

As you can see, it’s rare for utilities and energy to fall at the same time; they tend to be inversely correlated.

When you stop and think about this, it makes sense. Utilities sell energy they produce using fuels from oil and gas producers; higher profits in the oil patch, therefore, mean lower profits for utilities, and vice versa.

But as you can see, both sectors are headed down today—and that’s why utilities look so attractive: because they’re buying energy cheap while selling more of it into a surging economy!

And when you add in the fact that many utilities have something near a monopoly in their market, this opportunity gets better still.

3 Ways to Buy In

We could just buy XLU and call it a day. With a 3.5% dividend yield, we could feel satisfied that we’re getting utility exposure and a “set it and forget it” investment.

But you’d be leaving a lot of cash on the table when you stack up XLU next to those 3 high-yielding CEFs I mentioned off the top. They are the Reaves Utility Income Fund (UTG), the Cohen & Steers Infrastructure Fund (UTF) and the DNP Select Income Fund (DNP).

I’ve chosen these funds not only because of their strong historical returns, which I’ll get to in a minute, but also because of the quality of their management and their portfolios.

UTG, for example, has one of the best asset management teams in the utilities space, and UTF’s diversified portfolio across North American, Asian and European assets has protected investors from a major market downturn for years. Finally, DNP’s focus on high-yielding large cap US utilities and telecommunications companies provides stability and a dividend investors can count on.

Each one specializes in utilities and has beaten XLU’s dividend yield while matching—or even topping—the ETF’s performance since the 2014 commodity crash.

Topping the Benchmark—With Big Cash Payouts, Too

On a longer term basis, these funds have all crushed XLU.

Winning Out Over the Long Haul

But how do these funds’ dividend yields compare to that of XLU? Quite nicely.

The bottom line? Utilities have tremendous upside, and it’s only a matter of time till the market picks up on this. The 3 CEFs I just showed you are a great way to get in on the action.

4 Must-Buy CEFs for 2018 (Huge Cash Dividends and 20%+ GAINS Ahead)

Utilities aren’t the only shockingly cheap corner of the market resulting from the selloff. There are 4 more markets that are even better places for your money now. But you won’t find them by looking at the S&P 500 “heat map” above—they’re well off most investors’ radar screens.

But these 4 obscure markets boast cash payouts 4 TIMES BIGGER than what the average S&P 500 stock pays!

They’re plenty safe, and even more undervalued than utilities are now.

That means one thing: we’re looking at massive upside here, especially if you buy my 4 favorite funds—one from each of these 4 unloved markets—today: I’m talking 20%+ price gains in a year or less!).

AND you’ll collect an outsized 7.6% average dividend payout while you watch these 4 incredible funds’ share prices arc higher.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook

How to Get Your Cut of Apple’s Money Coming Back to the US

Financial risks can seemingly come out of nowhere. Think about how many on Wall Street were caught off guard by the 2008-09 financial crisis or even the volatility of a few weeks ago. Yet the potential risk emanating from the packaging of bad mortgages was in plain sight, but ignored.

Today, there is another financial risk lurking in plain sight. It lies in the vast overseas holdings of technology giants like AppleAlphabetMicrosoft and many others. I discussed this topic to my subscribers in the October issue of Growth Stock Advisor. But since there is so much misunderstanding about the roughly $1 trillion (or possibly as high as $2 trillion) in funds held overseas by U.S. multinationals, I wanted to clear it up for you.

I know there is much misunderstanding about this subject just from gleaning the comments section on several recent articles published by The Wall Street Journal. Apparently, Americans are under the impression that this $1 trillion is just sitting in bank accounts overseas and that both the overseas banks and host countries don’t want to lose control of this money. Nothing could be further from the truth. Let me explain…

The New Force in Global Bond Markets

I want you to think about it for a moment, and it will make sense. Over the past decade, the largest U.S. companies have built up cash piles of as much as $2 trillion, rising more than 50% in that time period. Why would these firms let all that cash sit there idly, parked in a bank account?

Well, they haven’t. Instead, these aforementioned technology companies – they control about 80% of the overseas hoard – and other U.S. multinationals have put the money to work by snapping up all sorts of bonds. The purchases have mainly been the bonds of other corporations, but government bonds have also been bought.

In fact, companies like Apple, have actually issued their own low interest rate bonds and then used some of the proceeds to invest into the higher-yielding debt of other firms. In some cases, it has taken a large anchor position in certain offerings à la an investment bank like Goldman Sachs. In effect, it has become one of the world’s largest asset managers.

According to the Financial Times, thirty of the top U.S. companies have more than $800 billion worth (mainly short- and medium-term) of fixed-income investments. The breakdown is as follows:

  • $423 billion of corporate debt and commercial paper (very short-term corporate debt)
  • $369 billion of government and government agency debt
  • $40 billion of asset and mortgage-backed securities
  • $10 billion of cash

Those 30 aforementioned companies have accumulated more than $400 billion worth of U.S. corporate bonds. That is nearly 5% of the $8.6 trillion market. Apple itself owns over $150 billion of corporate bonds, more than most asset managers. And Microsoft owns over $112 billion in government securities.

This should not come as a shock to students of history. Some of the banking industry’s most venerable names started out in other businesses. The Rothschilds were merchant traders that became the most powerful banking empire in Europe. As Mark Twain is reputed to have said, “History doesn’t repeat itself, but it often rhymes.”

Related: 3 Stocks to Sell Under Trump’s New Tax Law

The Risk to the Bond Market

I now want you to think about this scenario… let’s say most of these companies bow to political pressure and bring “home” this overseas hoard.

That would mean selling a lot of corporate and government bonds. The likely result would be a massive spike higher in interest rates. Just look at how poorly the market acted when there was just a hint of a tapering of purchases by the Federal Reserve. A massive unloading of bonds could quickly turn into a nasty market event starting in the bond market and quickly spreading to the stock market.

Ironic, isn’t it? A massive tax cut and ‘patriotically’ bring money back to the United States could end up being the trigger event for a recession caused by much higher interest rates.

Luckily, from what most of the technology companies (with the exception of Apple) have said in their latest conference calls, they are making no major plans to sell their bond holdings.

Microsoft – with the second biggest pile held overseas – said it had already been able to make all the investments it wanted under the old tax regime, and didn’t expect anything to change as a result of the law. Alphabet said, “There’s no change in our capital allocation.”

What It Means to You

As market participants, I think we should all breathe a collective sigh of relief. As of the moment, nothing has changed and you should just stick to your current investment plan.

But what if the political pressure heats up and these tech companies wilt and decided to liquidate their bond holdings?

Then putting money into the ProShares UltraShort 20+Year Treasury ETF (NYSE: TBT) would make a lot of sense. This ETF uses futures and swaps to correspond to twice the inverse of the ICE U.S. Treasury 20+Year Bond Index. It is up 15% year-to-date thanks to the recent bond market scare, but is little changed over the past year.

Since most of the tech companies own a lot of corporate bonds, and if you have a high risk tolerance, you could short corporate bonds ETFs such as the Vanguard Long-Term Corporate Bond ETF (Nasdaq: VCLT), which is down 4.7% year-to-date and the SPDR Barclays High-Yield Bond ETF (NYSE: JNK), which is down 0.6% year-to-date.

But only think about these trades if and when the technology companies begin liquidating their holdings. I do not think that will happen any time soon, but stay tuned.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley