Diversification away from the dollar and dividend yields are among the attributes Elyse Foster of Harbor Financial Group is seeking, and in today’s interview, she tells Kate Stalter which funds are achieving those goals.
Kate Stalter: We are talking today with Elyse Foster of Harbor Financial in Boulder, Colorado. Thank you so much for joining us today, Elise.
Elyse Foster: Well you’re very welcome. Thank you for having me.
Kate Stalter: You and I have talked in the past, and in the 2008 market meltdown, you were very adamant about looking at the broader economic picture and the market picture, to tailor your investments for clients based upon that. What is your take on the market these days, given the volatility and news-driven events that have been taking place?
Elyse Foster: Well, our biggest concerns are economic, and I am sure that is to be expected. The protracted slow economic recovery and the low job numbers have us concerned.
In addition, the failure and the impasse in the debt-ceiling talks, that’s of great concern. As are the failures throughout the foreign world…with some of the foreign countries failing. So those are our big concerns.
That said, we’re taking something of an opportunistic view to the current market, thinking that in the current relatively low-return environment, we want to take the gains and the upswing in the market prices where we can. So we’re positioned to pocket the gains, if you will, but also conservatively positioned just in case trouble arises.
Kate Stalter: In light of all that, then, what are some of the industries or broader sectors, or even global regions that you believe are showing strength right now?
Elyse Foster: Interestingly enough, most recently the health-care area has been a nice surprise, in terms of real rates of return and above-market and benchmark returns this year, so we’re very pleased about the health care exposure that we have.
In addition to that, foreign stocks have performed a little bit better than we thought they would. So we’re seeing some strength in specific areas there.
Kate Stalter: What are some of those foreign areas?
Elyse Foster: We took a broad position in foreign stocks with a Vanguard ETF in the hope that we could control it on the downside. So we are taking a fairly broad-based approach to our foreign investing currently.
Kate Stalter: And which ETF is that?
Elyse Foster: Vanguard’s broad international market index, the Vanguard Total World Stock Fund (VT).
Kate Stalter: Any sectors, regions, or industries, Elyse, that you think should be sold or avoided right now?
Elyse Foster: We do. We think that the biggest sector that shows concern for a value-oriented investor would be tech—and specifically the social media area. The P/E ratios are sky-high. We think investor demand is huge for low-barrier-to-entry products, and with the lackluster revenues, we think that’s a real area of concern.
Another weak area, absent any market correction or a flight to safety, would be long-term Treasuries, in our view. We think that there are other areas that hold more promise for investors.
Kate Stalter: What are some of the investment vehicles you are putting your clients into these days?
Elyse Foster: We think that for investors that are looking for diversification away from the dollar, specifically, Templeton Global Bond Fund (TPINX) is one of our favorites. It’s a diversified grouping of foreign-government bonds that has performed well.
In addition, we like WisdomTree Dreyfus Emerging Currency Fund (CEW). The yields are higher there, and we think that there’s a nice possibility for price appreciation.
We also like high-quality companies that have wide-moat characteristics with solid cash flow, and for that we like Yacktman Fund (YACKX). For investors that are worried about inflation and purchasing power, we like Permanent Portfolio (PRFPX).
Kate Stalter: What are any additional funds or ETFs, Elyse, that you think you might be looking at, or you think individual investors might give a look to?
Elyse Foster: Another one would be WisdomTree Dividend Ex-Financial (DTN). That’s WisdomTree’s broad dividend fund, and we purchase the ex-financial version of it so as to limit our exposure to financial companies. That has been a good position for dividend creation.
As a matter of a fact, Permanent and Yacktman have nice dividends as well. Many of the offerings that I mentioned here earlier have a nice return, which we think is good in this particular marketplace.