Hanging In There and Searching for Opportunities
By: Tim McPartland,
We can’t say that we are unhappy with our YTD performance (up 8.82%), but we did manage to screw up by holding some weak oil preferreds and now we are noting that the markets are starting to price in future economic problems in lower quality preferreds and exchange traded debt issues.
We are thankful that we mostly succeeded in navigating the slaughter in the MLP sector but we remain focused on the sector as while some have lost tons in this arena–there will be opportunities ahead–when and what they are we don’t know yet and honestly even when the sector seems to have bottomed we will be in no hurry. The only way this sector zooms higher soon is with a black swan event that sends crude oil prices spiking much higher and attempting to be a hero is not in our future.
The balance of the calendar year is likely to be exciting (for better or worse), but we don’t see making alot of portfolio moves in the next 3 weeks. We plan to use the time to think about next year–a year that could be just as dangerous to income investors as 2014 was to MLP investors. We could well see a drubbing of preferred stocks and debt issues if we see any interest rate shocks. So how can we safely attain our 7% goal (the same goal for 2013, 2014 and 2015)? We have some good ideas and will outline those ideas in the weeks ahead.
If one is planning ahead you may want to review all of our models—they really provide some very good insight into what might work. We are watching our 2014 Short/Medium Duration Income Portfolio as this seems to provide a good building base for a portfolio. It has not moved more than $300 (on $85,000 in investments) in a given day in 2 months and yet tosses off a relatively safe 6.68% yield. We had noted previously that we have one of our personal portfolios built almost identical to this and we are very, very happy with it this year. We are pondering moving more of our funds into a similar configuration.