BondsOnline Advisor – May 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.

For a list of securities, target prices, and detailed comments, get the current issue of Yield and Income Newsletter through PreferredsOnline.

Equity Strategies

JPMorgan Chase recently told clients it has returned to being constructive and ready to buy dips in the market for three reasons.

High-grade and High-yield markets have for the most part shrugged off Greek sovereign issues, a contrast to the substantial widening seen in February 2010; equity markets have reacted positively to first quarter earnings results, contrasting with the “sell the news” seen during the fourth-quarter reporting season; markets appear better able to separate “Secular vs. Transitory” on external events like the Goldman lawsuit, reflecting confidence in a strengthening economy.

As a result, it still sees the S&P 500 hitting at least 1300 by year-end based on its $90 2011estimated earnings per share and applying a 14.4 times price-to-earnings multiple. “We remain constructive on US stocks,” JPMorgan told clients in a recent note.

Whitney George, Co-Chief Investment Officer of Royce & Associates figures that, by historical standards, many investors are woefully under-allocated in equities. He expects a period of substantially increased M&A activity since companies are having trouble growing organically. He also believes credit is more readily available for healthy businesses.

Master Limited Partnerships

Morgan Stanley points out in its most recent weekly round-up report that first quarter earnings results thus far have varied widely. However, despite a mixed earnings picture, distribution announcements have been largely positive. The investment bank currently rates six midstream MLPs as Overweight.

Standard and Poor’s has a Buy or Strong Buy recommendation on at least two master limited partnerships.

REITs

Barclays recently raised its price target on two forest products companies that have elected to be treated as real estate investment trusts (REITs). “We remain bullish on timber and wood product fundamentals,” the bank recently told clients in a report.

Credit Suisse recently reiterated Outperform ratings on four residential mortgage REITs, asserting they continue to offer an attractive risk/reward outlook. “We expect the majority of the return to come from the dividend over the next 12-months,” it added in a recent report to clients.

Utilities

Morgan Stanley, Credit Suisse, and Wells Fargo Advisors weigh in on utiltities this month.

Closed End Funds

Stifel Nicolaus recommends investors construct a portfolio that anticipates rising interest rates. Among taxable funds, it says investors should begin to consider adding some exposure to senior loan or other adjustable rate funds.

© 2009, BondsOnline and BondsOnline Group, Inc.