It is time to reduce the risk in our portfolios and increase the margin of safety, cautions Bob Carlson, ETF and mutual fund expert and editor of Retirement Watch.
The Fed fell behind the curve on inflation. It won’t be supporting stock prices again until inflation is near its target,As such, we're selling some great long-term funds that were doing well — but don’t have the margins of safety I want now and will be hurt as economic growth slows. Here's a look a three new fund positions in our model portfolios.
Cohen & Steers MLP & Energy Opportunity (MLOAX) invests in energy-related securities, including master limited partnerships (MLPs) and companies that derive at least 50% of their revenues or operating income from various stages of energy production and sales. It should continue to do well while energy supplies from Russia and Ukraine are reduced.
The fund doesn’t follow an index, seeking the best opportunities based on fund management’s economic outlook. The portfolio can change rapidly. The turnover ratio is close to 100%, meaning there’s close to a complete change in the portfolio every 12 months.
MLOAX recently held 52 stocks and 55% of the fund was in the 10 largest positions. Top positions were Enbridge (ENB), Cheniere Energy (LNG), Williams Companies (WMB), Targa Resources (TRGP) and ONEOK (OKE). The fund is up 14.07% over three months, 23.58% so far in 2022 and 34.20% over 12 months.
Another fund I recommend returning to the portfolios is Cromwell Marketfield (MFADX), formerly named Marketfield and MainStay Marketfield. The fund has maintained the same managers while changing fund companies.
MFADX basically is a hedge fund in a mutual fund package. The fund can invest in almost any asset, including using derivatives and selling short. The managers examine economic and market data to identify trends they believe aren’t reflected in market prices.
Lately, the fund has been positioned for higher inflation, holding commodity- and energy-related positions. The fund also has been selling short stocks of software companies and others it believes are vulnerable or highly overvalued.
MFADX is down 1.64% over the last four weeks, but it is up 3.63% over three months, 2.96% for the year to date and 1.14% over 12 months.