4 Extra-Juicy Global Opportunities

03/09/2011 3:24 pm EST

Focus: STOCKS

John Reese

Founder and CEO, Validea.com And Validea Capital Management

These four plays combine strong growth prospects with solid income, and are the best choices out there for those looking to diversify into different international sectors, says John Reese, editor of the Validea Hot List, in this exclusive interview with MoneyShow.com.

I know in your Validea Hot List you look at a universe of stocks, lots of stocks. Are you seeing anything international that intrigues you?

Yes, indeed we are. One of the companies is called Telefonica (NYSE: TEF). It’s a $115-billion market cap firm based in Spain. It’s a telecommunication firm that covers a lot of Latin America, which has a high growth rate.

Because it’s part of Spain, it doesn’t get a lot of respect—yet here’s a company huge in size, dominating its market. And on top of all of that, paying a 7% dividend.

Not bad. So the growth prospects look good, as well as the income play.

Correct.

Any others that look attractive to you?

There are a couple of drug firms. AstraZeneca (NYSE: AZN) is one. Sanofi-Aventis (NYSE: SNY) is another. Basically each has a number of very high selling drugs.

The drug market is under a lot of pressure. The feeling is that, for drugs that are coming off of patent, regulation is going to discourage sales and the profitability will go out, but these drug companies have a history of recovering very, very nicely from each of these common crises.

What about pipelines. Anything going on there?

As a matter of fact, there are things going on in the pipelines, particularly with master limited partnerships. One company, Enterprise Products Partners (NYSE: EPD), is paying almost 7% right now, and it’s very tax-efficient. Of that, 80% to 90% of that is basically tax-deferred.

It makes very steady income, because it doesn’t produce oil and gas, but it is the pipeline that goes between important oil fields and other distribution centers, and it collects a steady amount of money off the top of that.

So how can investors take advantage of that?

It is available on the regular US stock exchange. You can simply buy shares of it.

You need to know what you’re getting into with the master limited partnership though. There are certain tax questions and implications. Rather than filing, giving you a 1099 Dividend Form, they give you a K-1—usually a month or two later than that. So, there are some concerns when you do invest that way.

But it is an alternative for those investors looking for income, who may not get it from bonds or things like that.

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Not only is it a good alternative to income, it’s a very steady income.

Even more important than that, it will continue to grow over time. There are price increases that are locked into the contracts that they have, so over the coming decade, you’re going to see dramatic increases in the distribution, not just holding steady with bonds.

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