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March, 2018

WHICH ASSETS ARE NOT IN MANIA MODE?
by LARRY

Last month's topic was manias then and now, so to give a bit of balance it seems only reasonable to also cover assets that are hardly popular at all. If the former kinds of venture are too often overvalued, might the latter be now more promising for long-term total returns? As the disclaimer indicates, I am not a professional, so please take my comments here with a grain of salt. Nonetheless, for what they are worth, here are a few of my current guesses as to ways to not come off too badly if investing today:


1. Cash under the mattress, money market accounts, short-term Treasuries, or other forms of secure cash reserves. While it is true these are hardly in great demand just now, it is also accurate that they pay little if any dividend to their holders and so might appear to have no value as investments at all. In fact, however, they can be worth their weight and more (for most cash is not all that heavy) in gold. The reason is simply that when, as always occurs sooner or later, the major markets plummet they inevitably will take the prices of good stocks down with them. If the companies which have issued the stock are financially strong, growing their cash flow nicely over time, then they may at that time be worth taking a investment significant plunge, and one's previously dismissed liquid reserves at that time will come in very handy and likely prove lucrative after all.


2. Intermediate-term corporate bonds. Bonds may be purchased outright or via closed-end funds or mutual funds. A good vehicle for this last means of acquiring bond value is the Vanguard Intermediate-Term Investment Grade Fund Investor Shares (VFICX). This fund has an initial minimum investment of $3000. (Another, the Admiral Shares version [VFIDX], has a bit lower fees, but requires a minimum investment of $50,000.) VFICX, at 3.13%, does not currently have a high yield. What is more, investors probably should be aware that as interest rates and/or inflation increase the initial investment is likely to drop to some degree. However, if one is gradually setting aside funds at regular amounts and intervals, for instance in an IRA or a 401k account, the investor can benefit from the bond market's ups and downs, getting more shares when the price is lower and so reducing the overall cost basis. In addition, VFICX has a decent long-term record. A $10,000 investment a decade ago, left untouched and with all distributions reinvested, would be worth about $16,000 today. Given that the stock market is overvalued, likely to decline substantially in at most the next several years, this might be a much better place to put one's hard earned dollars, all things considered, at least till after such a major drop in stock prices.


Out of Favor Equities

CompanyTicker
Symbol		Recent
Price		Dividend
Yield
Aircastle, Ltd.AYR$20.865.37%
AmTrust Financial ServicesAFSI$12.355.51%
WPP plc, ADRWPP$96.783.98%



3. Beaten Down Stocks. For the more adventurous, here are a few equities that currently seem sufficiently out of favor as to maybe deserve a serious look, due to their potential over the next few years.


There are few specific guarantees in investing. Yet by focusing more on what is not just now so popular we can on average do better in the long-run than by investing in what is seen by the hoi polloi as the current cat's meow.


DISCLAIMER

Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)



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