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Dollars and Sen$e — Insulation Strategy: Buy American
Posted October 4th, 2012

BY CHRIS HANLY

Investment Consultant, Gary Goldberg Financial Services

What was once the rallying cry of labor, it turns out, is a pretty good investment strategy for today’s environment, especially for investors who need income. You may be justifiably sick of hearing about Europe, and I will spare you the latest gory details. However, turning off the noise, albeit momentarily, does not do anything to abate your fears about what further deterioration in the EU might do to your portfolio. After all, the 27 nations which comprise the union are, in total, a major trading partner for the United States. The tepid GDP forecasts here in the United States owe their existence in no small measure to the EU. One unbelievably simple way to insulate your assets from further deterioration “over there” is to buy or bulk up on shares that generate 100% of their revenue here in the good old U.S. of A. Below is a list of them. Of course, there’s more than these, but the companies below are the ones that we like and own in the GMG Defensive Beta Fund or in client accounts.  Notably, the “I” in CCI stands for international which seems anathema to our thesis. Crown Communications owns cell towers in the U.S., Puerto Rico (technically the U.S.) and Australia.  Although definitely not the U.S., this stock may have the same effect since it is, in many ways, the polar opposite of the EU.

Entergy (ETR), Lorillard, Inc. (LO), Public Service Enterprise Group (PEG), CVS Caremark (CVS), Crown Castle International (CCI) and Dollar Tree (DLTR).

Another way to limit your European exposure would be through ETFs or mutual funds that invest in utilities. There may be more to this than simply avoiding catastrophe. I believe low, low rates are here for the balance of this decade. In fact, as portfolio managers, we no longer view bonds as a vehicle for generating income, but instead as a tool for lowering volatility. As such, if you need income you might consider switching into utilities. Without question, there’s more risk moving capital from debt to equities, but the current interest rate environment may make this assumption of risk a necessity – especially if inflation rears its head. One ETF we like is the Vanguard Utilities ETF (VPU), currently rated four stars by Morningstar.  We are invested in all of the stocks listed above, either in the GMG Defensive Beta Fund or in separately managed accounts for our clients.

 

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at (845) 368-2900 ext. 247 or chris.hanly@garygoldberg.com.

 

 

 

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