best investments
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Why Not All REITs are the Best Investments for Yield
In a yield-starved world investors have turned to real estate investment trusts (REITs) as some of the best investments for income.
REITs are structured so that they have to pay out the majority of their income to shareholders in order to retain their favorable tax status. Most of them yield far more than Treasury or corporate bonds so they have attracted attention and dollars over the past few years.
It is not just individual investors who are searching for yield. Large pension and investment funds can no longer meet their required rates of return by investing in traditional fixed income investment. They too have turned to REITs to make up the income shortfall.
However, when these large investors begin to direct billions of dollars towards the sector they are not very selective. Much of the money that flows into REIT funds and exchange-traded instruments is only concerned with gaining exposure to the real estate markets and gaining a yield advantage. This type of buying has helped the price of many of the larger more liquid REITs double and even triple over the past few years. They now trade at substantial premiums to their underlying asset value and earnings power.
The problem facing investors now is that the dollars have flowed into the securities for several years now and pushed prices to what may be unsustainable levels.
Any real estate investor can tell you that buying commercial or residential property in excess of its real value is a recipe for disaster especially if you use leverage.
A recent article in The Wall Street Journal's "Heard on the Street" column shows there is another developing threat to REIT prices.
According to the article, Japanese investors have been piling into U.S. REITs to take advantage of the extreme yield differentials as that country is using low rates to attempt to stimulate the economy.
In addition to the dividends, however, the Japanese funds are also paying out appreciation, including unrealized gains. If the growth in REIT share prices begins to moderate, these funds will have to start selling shares to maintain their payouts and this could pressure prices as they own billions of U.S. REIT securities.
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Best Investments 2013: Why Hedge Funds Love Greece
Talk about looking for best investments in the most unlikely places...
The bad economic news out of Greece has dominated the headlines for several years now. As the country tries to work its way back to prosperity, a solvent banking system is going to be critical to the process. Banks have seen their capital base shrink from bond haircuts, bad loans and depositors withdrawing money to get it outside the beleaguered nation's banking system.
As part of its plan to restore the nation's fiscal health, Greece has told the banks they need to complete a recapitalization plan that raises Tier 1 capital ratios by 9%. This should increase their solvency and allow the nation to receive further bailout funds from the European Union.
Restored capital levels should help the banks regain access to interbank markets and provide the liquidity needed to help push the economy back on track.
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Follow Africa's Richest Man Into One of the Best Profit Opportunities on Earth
Aliko Dangote is the richest man you've never heard of.
The 56-year old native of Kano, Nigeria is a self-made business magnate, with a net worth of more than $16 billion.
With boom times ahead for Africa, Dangote is leading the continent's headlong charge into infrastructure building and resource exploration.
A person of vision and drive, he's well suited for the unfolding boom, and all the opportunity it offers.
As the African Century moves into its second decade, Dangote is still very bullish on Africa-- making - and keeping - most of his fortune there.
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Energy Among the Best Investments from Ira Sohn Conference
There was definite energy spin this week at the 18th Ira Sohn Investment Conference at New York's Lincoln Center. In fact, at this an annual gathering of some of the world's influential money managers and investors, energy was applauded as one of the best investments to make now.
Some 3,000 guests paid as much as $100,000 (proceeds benefit pediatric cancer resesarch) to hear what 17 of Wall Street's lucrative members had to say about the stock market. Each had some 15 minutes to share their picks, pans and opinion.
Clearly, energy was a favorite, as Barron's outlined in its Ira Sohn coverage this week.
Here's a roundup of what these money managers consider to be the best investments in the industry.
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Best Investments 2013: How the Mining Mess Will Send Platinum Soaring
Thanks to the hit gold prices took in mid-April, other precious metals also got caught in the downdraft - but some still look to be among the best investments of 2013.
Take platinum, for example.
It is currently trading at about $1,500 an ounce, well off its 52-week high of $1,734 an ounce. During the height of the selloff last month, it touched a low of $1,381 an ounce.
Investors sold it along with all other precious metals, even though the fundamentals for platinum may be better than ever.
While platinum's long-term outlook is bright, a short-term price catalyst is about to take place, as early as this week.
The world's biggest platinum producer, ANGLO American Platinum (Amplats), could take a significant amount of platinum off the market. The restructuring could cost 14,000 jobs and close two South African mines.
It'll also help drive a supply deficit that will only expand in the years ahead, making platinum one of the best investments to make now before prices soar.
No wonder Sprott Holdings' Rick Rule bought $280 million worth of platinum and palladium earlier this year...
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The Best Sector to Invest in Now
I try to keep a balanced portfolio, or at least one that isn't entirely concentrated in one sector.
I like a lot of international holdings, especially from East Asia (but not particularly China itself) and I try to have at least some representation even in sectors that bore me utterly, like consumer packaged goods - Procter & Gamble (NYSE: PG). I know you've increased your dividend every year since 1954, which is a magnificent achievement, but I STILL can't get excited about your business!
Some market sectors I have difficulty warming up to. Tech, for example, I find very difficult to analyze. If a company has the latest whizz-bang, I can't tell how the market will receive it. I can't tell how long market enthusiasm for it will last, and I can't tell how quickly competitors will produce something that's just a little bit better.
Even an Apple (Nasdaq: AAPL) that appears to have an invulnerable position can very easily be undone by margin erosion. Apple's margins are unsustainable in a competitive environment; it has a business in which Foxconn, the manufacturer, makes very little money while Apple, the retailer, makes heaps of it. For me, instead of trading at a premium to the market because of its growth, tech should trade at a discount to the market because of its risks.
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Best Investments 2013: This Could Be the Most Lucrative Time Ever for Biotech
Some of the most exciting developments in the last fifty years have been in the biotechnology industry - which has also meant the emergence of some of the best investments for 2013.
Just look at the progress biotech has made in medicine.
Using advanced technology and research, scientists in the life sciences industry are working on cures for diseases that have plagued mankind for decades. In a relatively short period of time, biotechnology has produced medications that have pushed many forms of cancer to the brink of defeat. HIV infection went from a death sentence to a manageable - and almost cured - condition, in just a few decades.
Biotech share prices have reflected these successes.
As Barron's pointed out last week, biotech stocks have soared 111% over the past couple years, about three times better than healthcare stocks.
And early investors in biotech have seen astronomical gains over the past four to five years.
Regeneron Pharmaceuticals Inc. (Nasdaq: REGN) has soared from less than $5 a share back in 2005 to more than $240 a share today as its drugs have been used to battle ophthalmological disease and several forms of cancer. Incyte Corp. (Nasdaq: INCY) has seen its stock price rise from $2 a share just four years ago to more than $20 today. Early investors in industry leader Amgen Inc. (Nasdaq: AMGN) have seen gains of almost 100 times their initial investment.
But those gains are far from over.
In fact, right now just may be the best time in history to be an investor in the biotechnology sector.
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Best Investments 2013: Are TARP Warrants the Way to Play Banks?
Believe it or not, the big bank rescue plan known as the Troubled Asset Relief Program (TARP) actually has created some of the best investments for profiting from a banking recovery.
As you may recall, the federal government gave money to troubled banks in order to shore up balance sheets wounded by falling real estate and mortgage security prices. As part of the program, the government took an equity stake in these institutions in the form of preferred stock and equity warrants.
When the funds were repaid, the securities - including the warrants - were auctioned off to the public.
Equity warrants are a form of derivative security that gives the holder the right to buy a stock at a certain price until the expiration date. This is much like a stock option but warrants are usually issued for a much longer period of time. They are usually traded on the exchange and are priced based on the strike price, current interest rates and length of time until expiration.
Most of the TARP warrants still have a long time to go until they expire. The majority last until about 2018.
And now is looking like a good time to buy in to these warrants.
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How to Invest in E-Cigs: The Cigarette of the 21st Century
They look like cigarettes, feel like cigarettes, taste like cigarettes - and, smokers will tell you - satisfy the craving for a smoke.
But electronic cigarettes, or e-cigs, don't have any of the offensive smoke that's so harmful to health. Instead, they feature an odorless vapor in which nicotine is delivered to the user. And they're sometimes allowed in public places where cigarettes are banned.
Studies show e-cigs make smoking healthier for smokers and those around them, while also helping smokers quit.
Plus, e-cigs cost about half as much as regular cigarettes.
Big tobacco continues to place bets that electronic cigarettes can keep the tobacco industry and its annual sales north of $750 billion and growing.
Altria Group Inc. (NYSE: MO), the world's biggest tobacco company and parent company of Philip Morris USA, is the last of the three major U.S. tobacco firms to get into the e-cigs game.
"There is no denying that adult tobacco consumers have shown interest in it," Marty Barrington, Altria's CEO, told investors during an earnings conference call last week.
Thanks to increased health awareness, as well as the introduction of several taxes which have led to the price of packs more than tripling in some cities, cigarette sales began declining over15 years ago and continue to do so, falling 6.2% in the first quarter of 2013.
Even though e-cigs were introduced almost 10 years ago, they are just starting to take off. Sales in the U.S. totaled $500 million in 2012 and are expected to double to $1 billion in 2013.
And a recent study by the Centers for Disease Control and Prevention found that 21% of adults who smoke regular cigarettes had used e-cigs in 2011, up from 10% in 2010.
So, now that e-cigs are growing more popular, what's the best way to invest in them?
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The 10 Secrets of Successful Investing
For Sir John Marks Templeton, the road not taken really did make all the difference in the world.
A true contrarian, the legendary investor became a billionaire by "avoiding the herd".
He bought low, sold high, and was always working against the grains of extreme bullish and bearish sentiment.
In fact, it is when the streets were the bloodiest that Templeton became the most eager to invest.
It was at these moments of what Templeton called "points of maximum pessimism" that he began to wade in snapping up rock bottom bargains along the way..
