There are some great harbors in these storms for investors counting on steady streams of solid income, writes Neil George of the Pay Me Strategy.
What should you be focusing on during the next few months—especially if the theme of the globe’s markets is destruction of value? The key, of course, is to make sure you own cash cows.
They’re there to make sure that, despite any market price action, that your retirement portfolio is paying you—both to ensure that you can pay your bills, while also building up your portfolio with cash piling up.
This means starting with the four favorites that have been around for years and years. The four global bond investment companies’ top funds—AllianceBernstein (AWF), Templeton (TEI), Pimco (RCS) and Western Asset (ESD)—continue to do what they’ve always done.
Right now—even with the recent market mess—all four of these continue to perform. Combined, the four are generating an annualized return so far this year of over 12%.
Sure, you’ve seen some stock-price losses recently, but 12% is still 12%—and this is pretty much the continuation of the long, multi-year history of these four stocks.
One of the keys to their success is that the managers of these investments don’t buy into the hype of the AAA markets, which are priced to fail, as has become the near-term fate of the US Treasury. Instead, they invest in the markets where debt is low, revenues and exports are high and rising, and capital is flowing into and not out of them. Keep buying.
Better Than Gold
Food, glorious food, is one of the basic necessities able to be priced in the markets, and even while other commodities such as energy and industrial minerals might see some ebbing in demand, food demand and the resulting price action is continuing to rise.
Look at the global pricing of agricultural food products, as tracked by the United Nations’ Food and Agriculture Organization (FAO). The agency’s price index is up over 65% in the past two years alone—even trumping the mania in gold bullion.
The key to investing in the profit of necessity is to focus on the companies that are being called on to empower more food production.
Monsanto (MON) has been a favorite for years, and while its price action has been trying as the market has had some trouble pricing the transition from lower-value added chemicals toward the high-value added GMO (genetically modified) technologies, the company has continued to deliver. The past five years have generated a return in excess of 57%, against the measly 4%-plus of the S&P 500.
But there are two new necessities buys that will add to the food mix for your portfolio. Both are Israeli-based and are on the other side of the GMO market—via their fertilizers and chemical technologies.
The first is Israel Chemicals (ISCHF), which is one of the world’s leaders in fertilizer and related agricultural products. Sales gains from their product lines, sold worldwide, are rising at an average of 25%.
Margins are fat at over 23% and rising, as it’s not focusing on mass-market generics, but its own lines of products. And with boatloads of cash and very little debt, the company is solid even if the globe’s markets continue their woes.
Moreover, it also shares its cash with shareholders—currently paying over 4% in a rising currency against the dollar. Buy it under $18.50. [The stock is well in this zone, trading for barely over $14 on Tuesday—Editor.]
The second new comer is Makhteshim-Agan Industries (MAIXF). This company has been noted before over the years in my writings, as it is one of the innovators in the agricultural technology market.
It is now a buy, not just due to its own portfolio of products, but due to its new partner: China National Chemicals, which is being approved by regulators in Israel to take a major stake in the company.
The result will be to make an already valuable company even more capable, with added capital and a massive new distribution line into the Chinese agriculture market.
While not paying a dividend currently, it is worth a nibble, as its next move should be to grow. Buy it under $6. [Shares are going for $5.50 late Tuesday, but volume is low for this OTC vehicle—Editor.]
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