Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
A New Take on Hedging
11/17/2006 12:00 am EST
In his latest issue, Keith Fitz-Gerald expands on his bullish 2007 market outlook and also offers his subscribers a unique way to hedge their portfolios via entry into an unusual mutual fund that is paying tremendous dividends.
"Alpine Dynamic Dividend Fund (ADVDX) is a mutual fund that seeks long-term capital growth by using many of the same strategies that I do as a professional trader. There are a couple of things going for it that make it ideal for what we expect in the months ahead.
"The fund is paying an outstanding 12% dividend yield right now. And unlike other funds that are strictly limited to specific investment choices and mandates, this one is wide open. Alpine's managers can use practically any technique they want to achieve returns-from covered calls to index options to convertible securities.
"About 30% of the fund's holdings are overseas, which means that Alpine Dynamic is hedged against the dollar. This adds super stability while preserving purchasing power at the same time.
"The fund also pumps up the dividend flow by using a unique investment strategy. Alpine will buy a stock right on the ex-dividend date (the date when shareholders no longer are eligible for dividends) and will hold the stock for at least 61 days during a 120-day period to take advantage of reduced federal tax rates. Therefore, one part of the portfolio is constantly turning over and increasing the dividend flow to more than just quarterly payments.
"This innovative equity income fund was started just three years ago. I've been watching the fund's management, and I'm very impressed by what I've seen so far. In 2004, Alpine's first full year of trading, the fund gained more than 23%. From its inception in 2003 through the end of June, Lipper Analytical Services ranked Alpine Dynamic number two among 179 Equity Income Funds. It was also ranked #28 among 225 Equity Income Funds for the one-year period through June 30, 2006.
"For those of you who use Keith's Edge, you can still benefit from holding Alpine in your portfolio. It's a solid holding that is both flexible and consistent in its approach to producing income. Alpine has a low $1,000 minimum investment and needs to be purchased directly. You can call 1-888-785-5578 or visit http://www.alpinefunds.com to get started.
"Think of Alpine Dynamic as your own private hedge fund. It has an aggressively managed portfolio that generates high returns, yet the fund has all of the safety of an income fund."