Mid-Year Income Performance Review

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Delphi Financial Group 7.376% Fixed

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Mid-Year Income Performance Review

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Mid-Year Income Performance Review

The financial markets were a sea of tranquility in the first half of 2014. Nonetheless, it’s been an interesting year thus far . . .

The Federal Reserve is proceeding with its tapering of asset purchases.

We’re in the midst of a raging M&A boom.

From a macro perspective, geopolitical risk has risen in many regions.

From a micro perspective, we’re getting further confirmation that the markets are, in fact, rigged.

In the United States, consumer discretionary stocks are lagging, and utilities are leading.

Indeed, the midpoint of the year is a great time to assess which investments have worked for us, as well as where we have stumbled.

The following tables show all of the securities that I’ve mentioned positively in the first six months of the year. The date of the article and total return (including dividends) are also provided.

Out of the 42 recommendations I made, a total of 39 were positive, as of June 30, 2014 – a 93% win rate.

Equities

Ticker Name Date First Mentioned Total Return
PAAS Pan American Silver Corp. 01/27/2014 28.1%
AUQ AuRico Gold Inc. 01/27/2014 -5.5%
AGI Alamos Gold Inc. 01/27/2014 14.7%
CAGDF Centerra Gold Inc. 01/27/2014 58.5%
TXN Texas Instruments Inc. 01/30/2014 12.7%
QCOM QUALCOMM Inc. 01/30/2014 9.2%
CVS CVS Caremark Corp. 01/30/2014 11.8%
PFE Pfizer Inc. 02/10/2014 -4.8%
ORCL Oracle Corp. 02/10/2014 9.0%
HES Hess Corp. 02/10/2014 29.2%
FFG FBL Financial 02/27/2014 12.2%
ESV Ensco PLC 03/13/2014 15.4%
APU AmeriGas Partners LP 04/03/2014 7.5%
WEC Wisconsin Energy 04/03/2014 1.1%
DUK Duke Energy Corp. 04/03/2014 6.5%
AEE Ameren Corp. 04/03/2014 1.7%
PEG Public Service Enterprise Group 04/03/2014 8.1%
CNK Cinemark Holdings Inc. 04/24/2014 20.9%
RGA Reinsurance Group of America Inc. 04/24/2014 0.0%
OHI Omega Healthcare Advisors Inc. 04/24/2014 5.9%
AAPL Apple Inc. 04/28/2014 10.1%
APO Apollo Global Management 05/01/2014 6.2%
RE Everest Re Group Ltd. 05/12/2014 1.7%
MRH Montpelier Re Holdings Ltd. 05/12/2014 1.9%
AXS Axis Capital Holdings Ltd. 05/12/2014 -1.9%
PRE PartnerRe Ltd. 05/12/2014 3.4%
RNR RenaissanceRe Holdings Ltd. 05/12/2014 6.5%
VR Validus Holdings Ltd. 05/12/2014 4.6%
NTAP NetApp Inc. 05/22/2014 1.0%
XRX Xerox Corp. 05/22/2014 5.8%

 

Exchange-Traded Funds (ETFs)

Ticker Name Date First Mentioned Total Return
VIG Vanguard Dividend Appreciation ETF 01/23/2014 7.3%
DLN WisdomTree LargeCap Dividend Fund 02/06/2014 12.6%
VEU Vanguard FTSE All-World ex-US ETF 03/07/2014 5.5%
GVAL Cambria Global Value ETF 04/14/2014 1.0%

 

Fixed Income / Preferreds

Ticker Name Date First Mentioned Total Return
DFP Flaherty & Crumrine Dynamic Preferred & Income Fund 02/20/2014 13.6%
DSL DoubleLine Income Solutions Fund 02/20/2014 9.0%
JGT Nuveen Diversified Currency Opportunities Fund 02/20/2014 16.1%
912828B66 U.S. T-Note 03/20/2014 2.4%
MITT-B AG Mortgage Investment Trust Series B Preferred 04/10/2014 6.9%
CYS-B CYS Investments Series B Preferred 04/10/2014 2.8%
DX-B Dynex Capital Series B Preferred 04/10/2014 5.5%
VFIIX Vanguard GNMA Fund Investor Shares 06/17/2014 0.8%

 

As you can see, I’ve covered everything from speculative, small-cap gold miners to a low-volatility agency MBS mutual fund. I felt that each security presented an attractive risk-reward relationship on the date of mention.

In an effort to be transparent and accountable for my timing, I wanted to provide this mid-year performance review. Feel free to use the Income Archives to review the context of each article.

In fact, I suggest that you review all of your sources for investment ideas and analysis. I mean, how many of them were pushing the panic button with respect to rising interest rates early this year?

Not Wall Street Daily.

Instead, we were positive on interest-rate-sensitive investments – including bonds, preferred stocks and utilities, which have performed well. For example, the Flaherty & Crumrine Dynamic Preferred & Income Fund (DFP) has returned 13.6% since my mention.

Fast dividend growers, such as Texas Instruments (TXN) and CVS Caremark (CVS), have also done well. Research shows that stocks with high dividend yields don’t consistently offer high risk-adjusted returns. This is why we tend to focus on dividend growth – not yield.

You’ll notice that Pfizer (PFE), which has a solid dividend yield, is down 4.8% since my article on companies with high profit margins.

Ironically, many readers were wondering why Oracle (ORCL) and Hess (HES) were mentioned in the same article, since they have much lower dividend yields. Well, the performances speak for themselves, with ORCL up 9% and HES rocketing 29% higher.

Keep in mind, we’re seeking a high total return, which includes both dividends and capital appreciation.

My performance figures also highlight the importance of diversification. Despite excellent timing with my article on precious metals miners, one of my picks, AuRico Gold (AUQ), is still in the red. The same goes for my article on reinsurance companies, with AXIS Capital Holdings (AXS) being the lone standout in the group.

The stocks I’ve mentioned most recently look to have just started to outperform. For example, after my profile, NetApp (NTAP) was featured by Barron’s as a stock that has the potential to “rise 25%.”

Overall, I’ve been defensively minded in the first half of 2014. But as you can see, there have been a lot of opportunities, despite this cautiousness.

Our research and analysis is designed to uncover these opportunities. Remember, although you should feel free to utilize our investment ideas, you should never blindly follow anyone’s recommendations. Do your own homework, and decide which securities are most appropriate for your objectives.

Safe (and high-yield) investing,

Alan Gula, CFA

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