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Bonds Part II: Global Gains

07/25/2003 12:00 am EST


Neil George

Editor, Profitable Investing

During the past few years, some of the best investments that have accomplished both price gains and steady, heady cash have been unsexy bonds," says Neil George, newly appointed senior editor of Personal Finance. His current favorites include closed-end bond funds with a global focus.

"PIMCO Strategic Global Government Fund (RCS NYSE) remains one of the best ways to grow your money. PIMCO has walloped the rest of the stock market by over eleven-fold in the past five years. Strategic Global owns a bunch of different bonds that include US and foreign governments, including agency notes. But Strategic Global conservatively hedges its exposure to currency dangers or volatile foreign bond markets. It’s had a little pullback in the past few weeks as the markets have tried to digest the unraveling problems at two of the biggest mortgage lenders, Fannie Mae and Freddie Mac. And a little competition from other companies’ stocks also has made PIMCO an even better buy. Buy PIMCO Strategic Global up to 13 and keep piling its 7%-plus dividend into your portfolio.

"Another favorite that will add to your diversification in this sector is the Morgan Stanley Global Opportunity Bond Fund (MGB NYSE). It runs a similar business with a little more risk than PIMCO, but currently delivers a bit more dividends and is slightly cheaper; it trades at a more than 5% discount to what its bonds are worth. The company has been around for about a decade and only turned in small losses in two of its years. Meanwhile, it’s recently been coming into its own, outperforming PIMCO at its own game. Buy Global Opportunity up to 7.50 and let it grow your cash.

"The managers and employees of Franklin Templeton have been around the block—and the globe—for decades. These guys know the difference between booms and busts and when it comes to bonds, they know what to buy and what to sell. At the core of its offerings is the Templeton Global Income Fund (GIM NYSE). This company focuses on the most stable and solid creditworthy bonds of the big markets. It has a peer—the Templeton Emerging Markets Income Fund (TEI NYSE). It works foreign markets that are improving their lot in life, along with their credit and prices. It’s slightly more aggressive than Global Income, but diversifying between the two will dampen some of that risk. Both Global Income and Emerging Markets pay fat dividends and keep performing impressively, making them buys at current prices."

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