Wrapping Up February and Looking Forward to March

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Well February was a good investing month for income investors. While REITs are experiencing a little indigestion, preferred stocks and exchanged traded debt performed well and now, just in the last couple of weeks, business development companies (BDC’s) got turned around finally and recouped some of their recent losses.

Our 2014 Model Portfolio – Blended Income (last years model which continues to run) moved up nicely ending the month +2.58% for 2015. This gives this model a gain since 1/3/2014 of +12.34%. The current yield of this portfolio is at 7.08%.  We repositioned this model to a less aggressive position in perpetual preferreds, but that has not hurt performance to any great degree.

Our newer 2015 Model Portfolio – Blended Income was set up to be less aggressive than the older model and has a current yield of just 6.68%. This model is up 1.47% through the 1st two months of the year. Recall that we ‘charge’ the portfolio a commission when buying issues to set up the model and additionally we get a dividend stream ‘lag’ as we miss January payments as they go ex-dividend in December–prior to our ownership. We think this model would be up about 2% if not for these factors.

In both Models our variable rate MLPs have done well during February. Alliance Bernstein (ticker:AB) and CVR Refining LP (ticker:CVRR) started heading higher as AB announced a nice payout and CVR is anticipating good refinery profits.

The conservative 2014/2015 Short/Medium Duration Model Portfolio has performed incredibly well. We set this model up on 10/2014 to see if we could reduce volatility while still garnering a pretty good return. Potential capital gains were not a consideraton for this portfolio. In spite of not really planning on capital gains we have experienced 1.1% in capital gains since October and have a overall gain of 3.48% which is quite incredible in under 5 months.  We are excited about the potential for this model being a ‘base’ for a portfolio that could have 75% conservative medium duration issues (or whatever one would choose) with 25% higher yielding issues.

Looking ahead to March we will be looking for additional variable rate MLPs and potential bargains in REITs as they set back from their overbought prices (they are off 6.8% from their 52 week highs).  

Even though we have positioned our portfolio’s in anticipation of higher interest rates we likely aren’t going to see them for quite a while.  Just the same our performance will only be knocked down maybe 1/2% with this positioning.  Of course only God knows what will really happen with rates as there is too much global uncertainty to be able to really make a decent forecast. All we can say is that for us, with our capital preservation theme, we would rather be safe than sorry.

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