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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (39922)11/4/2010 9:01:45 PM
From: E_K_S  Read Replies (2) of 78700
 
Hi Madharry - it might be worth the high management fee (ie less than 2%/year) if you have good liquidity. I own MHR preferred w/ 10.25% yield but it is not that liquid. However, if I sell them at a $0.50/share discount to liquidate, that's only 1/4% hit to my return.

The big issue with the MHR preferred is specific company risk. I am willing to have the portfolio take some of that risk (perhaps up to 5% of the portfolio) for the higher yield.

My plan is to park some of my idle funds into the MHR preferred.

I just held too much of the FR & BDN preferreds which I needed to trim.

Many of those high yield mutual funds and/or CEF have very high annual management fees. Anything over 1.5% is too much for me especially when the NAV is over 100%. I was in some of those CEF that sold at a discount and had a decent yield but many are selling at a premium to their NAV. I sold out of my funds in October.

Be careful as I believe many of these bond funds are at bubble over valued levels. With QE2 and investors chasing yield, other high yielding plays (ie MLP's) are ripe for a stiff correction.

My plan is to park the funds in my credit union (1% annual yield) undervalued dividend payers, MHR preferred and some foreign ADRs that should do well with a falling $US. Just remember that once QE2 ends and rates begin to rise, all the things working now will fall in value (except hard assets). Hold onto your SLW - silver, gold & platinum and of course Oil & NG.

EKS
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