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High-Yielding Global Funds
06/24/2014 10:00 am EST
The driving force behind Briton Ryle’s The Wealth Advisory is to help long-term investors find dividend-paying investments that can be held through all market environments. Here, he looks at two high-yielding global funds.
Alpine Global Premier Property (AWP)
In the March 2014 issue, we raised our rating on the Alpine Global Premier fund to strong buy. The fund was trading around $7 at the time and still is.
But the chart looks very interesting. The price has been consolidating between $6.75 and $7.75 for a year now, and the range has been steadily decreasing.
This is “coiled spring” behavior. Of course, we can’t predict when the stock will move higher, but we can note that the breakout point is currently around $7.20 and the Net Asset Value of this fund has risen to $8.10, yet the shares have not really moved.
Emerging markets have recovered over the last few weeks, and that will benefit AWP. This fund gives us exposure to the US and Brazilian real estate markets. These two countries account for 49% of the fund’s $763 million in assets.
In 2008, as the financial crisis hit, Alpine Global was a $14 stock and paid around 10%. It currently pays 8.4% in monthly installments of $0.05.
We rate the Alpine Global Premier Property Fund to “strong buy” at current levels. Our price target is $11.
BlackRock Global Opportunities Fund (BOE)
The BlackRock Global Opportunities Fund is a leveraged fund. The manager sells individual stock options on the fund’s holdings to generate income.
While this may sound like a risky strategy, what we’re really talking about is selling covered calls (which are “covered” by the fund’s holdings) or selling puts (which could result in advantageous entry points in a worst-case scenario).
78% of the fund is invested in large- and mega-cap stocks, and 43% of its holdings are in the US. The next biggest allocation is 10% for the UK.
From a sector perspective, its largest allocation is to financials, representing 21% of the fund’s assets. IT, Consumer Staples, and Consumer Discretionary each carry 11% allocations.
Net Asset Value has improved to $16.75. The discount to NAV for these shares has improved to 8%, though it has averaged 12%. The 52-week low for the NAV discount was 13.98%.
We expect the fund can continue to improve in price as investors get more comfortable with the thought that the dividend is not about to be cut again. We rate this fund a “buy” and are raising our 12-month target to $18 a share.
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