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Income Security Recommendations
BondsOnline Advisor –March 2010
By Stephen Taub
The BondsOnline Advisor strives to present you with income investment insights from analysts throughout the United States. Bonds, preferred stocks, real estate investment trusts, or master limited partnerships can be a part of a successful income portfolio – and BondsOnline and PreferredsOnline provide the “Income Investor Tools” to keep you informed.
Bank of America Merrill Lynch asserts that true foreign demand, not foreign exchange, is driving growth. Separately, BofAML told clients that although Energy and Financials are fraught with the most volatility, they probably offer the most upside in 2010. Financials are its favorite US recovery play as it expects earnings to rebound strongly. It figures banks will stop adding to loan loss reserves in 2010 and net interest margins will benefit from the Fed keeping the Fed Funds rate unchanged in 2010 and the yield curve steep. It believes energy issues could see P/E expansion as confidence in higher normalized earnings will rise if oil prices stay high despite a stronger dollar.
Citi recently told clients it believes equity markets may have as much as 10% to 15% further upside. “The S&P 500 could be setting up for more appreciation driven by earnings strength and positive news flow of continued domestic economic strength,” it added in a recent report.
Deutsche Bank recently reiterated its $80.80 EPS estimate for the S&P 500 and maintained its target of 1325. “Strong earnings momentum and a turn in provisioning argue for revising up estimates, but faster than expected dollar appreciation argues against,” it elaborated in a recent report to clients. The bank added it is overweighting the Financials, Industrials, Consumer Discretionary and Tech, citing an imminent increase in enterprise spending, positive guidance and a turn in provisioning.
See what Citi Investment Research and Morgan Stanley have to say about ten energy master limited partnerships (MLPs).
REITs
Credit Suisse recently reiterated Outperform ratings on at least three real estate investment trusts (REITs). Deutsche Bank and JPMorgan Chase reiterate Buys or Outperforms on five REITs.
Utilities
Wells Fargo Advisors and Citi identify five utilities that are recommended and trading below their target prices.
Closed End Funds
Of the 23 equity-oriented funds that Stifel Nicolaus covers, just nine are rated Buy. And of those nine, just five have current yields that exceed 3%. The brokerage has a Buy rating on just three taxable fixed income funds.
Preferred Stocks
UBS believes that the best relative value areas are higher fixed coupons (near 8% area) and floating coupon preferreds that have credit risk exposure, but low duration risk. The high coupon income that preferreds generate provides a buffer to help absorb any price loss stemming from higher Treasury yields.
Income Security Recommendation December 2011 Issue.
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