March 24, 2008
2, Issue #8
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3. PIMCO Real Return D (PRRDX)
5. Investor Trivia -- Currency
6. Featured Topic --
Small-Cap Value Stocks
7. Free Investing
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Top Stock Picks
China! Investors Look to
Singapore for Double-Digit
China and India aren't the best
places to search for
high yields. However, income
investors can benefit by
investing in other Asian
countries that are directly
profiting from their growth.
Read More. . .
Ultra-Safe Treasury Fund with a Yield of 7.8%
Managed by the world's biggest bond
manager, this fund has an ultra-safe "AAA"-rated
portfolio of U.S.
Treasuries and a solid yield.
Read More. . .
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Although there were
only four trading days in the past holiday-shortened week, there were
enough market gyrations to last a month.
On March 11th, the Dow Jones Industrials shot up 416 points on
reassuring news that the Fed was pumping $200 billion in loans to
liquidity-stricken financial institutions. Unfortunately, those
gains unraveled within a few short days after worries intensified
that Bear Stearns (NYSE: BSC) was in dire need of a bailout.
And those fears came to surface this past Monday when word got
out that JP Morgan Chase (NYSE: JPM) had engineered a deal to
acquire the beleaguered company (which has borne the brunt of the
mortgage-backed security meltdown) for the fire-sale price of $2 per
share -- a remarkable collapse for a stock trading above $150 at
this point last year.
However, Bear Stearns' troubles were brushed aside on Tuesday,
thanks in part to better-than-expected news on the earnings front --
from Lehman Brothers (NYSE: LEH) and Goldman Sachs (NYSE: GS) no
less. But a sharp interest rate cut of 3/4 of a percentage point was what really jump-started the market.
The Fed has now slashed rates six times in the past six months,
aggressively lowering the benchmark fed funds rate to just 2.25%,
less than half of where it stood last summer. And traders showed
their appreciation, sending the Dow up 420 points (+3.5%), while the
S&P 500 and Nasdaq both shot up more than +4% -- the biggest one-day
surge in more than five years for all three of the major averages.
Unfortunately, in action very reminiscent of the prior week, the Dow
surrendered nearly 300 points of that gain the very next day, before
bargain hunters came rushing back in on Thursday. For the week, all
the averages finished sharply higher.
As the age-old
battle between fear and greed wages on, there is a growing sense
that the Fed's intervention, along with the economic stimulus checks
set to arrive at the doorsteps of 130 million households over
the next few months, might be just enough to give the economy a
But while the American economy
might be in limbo, China and India still have decades of strong
growth ahead of them. But for investors looking for income, these
growth stories might not be the best place to put your money.
However, thanks to their boom times, neighboring markets are
offering juicy double-digit yields. And below,
High-Yield International editor Nick Lanyi profiles
one Asian country that is profiting hand over fist and
rewarding income investors at the same time.
Investing editor Carla Pasternak takes us on a tour of
PIMCO Real Return D (PRRDX). With a portfolio chock full of
secure "AAA"-rated Treasuries and inflation-protected securities,
this fund will keep you calm in even the roughest of markets.
-- Nathan Slaughter
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Investors Look to Singapore for Double-Digit Yields
by Nick Lanyi, Editor --
there's a problem.
If you're an income investor,
then China and India aren't the best places to search for high yields.
For the most part, companies in these two emerging markets pay
little or no dividends; they're too busy reinvesting cash into
their businesses or acquiring competitors as they strive to keep
up with the surging economy.
So, how can income investors take
advantage of economic growth in these markets, yet still lock in
solid dividend yields? The answer is simple -- invest in
other Asian countries that are directly benefiting from the
economic boom in China and India.
Asian Countries Deliver Big Gains
Not surprisingly, stocks in surrounding
nations like South Korea, Japan and Singapore have delivered
strong returns in recent years. The table below tells the
tale, and the same phenomenal growth story applies throughout the
rest of Asia.
data as of December 2007
As you can see, by and large, all of Asia is enjoying an economic
boom -- thanks in no small part to what's happening in China and
India. As these two economies have grown, trade with their
neighbors has picked up, leading to increased demand for natural
resources and other important exports from surrounding countries
like Singapore and South Korea. This has fueled strong
economic growth throughout the entire region.
And while the pickings are slim when it comes to high-yield stocks
in China and India, many surrounding countries are loaded with
high-quality dividend payers. Best of all, thanks to solid
economic growth in the region, these dividend-rich firms are
generating strong cash flows -- cash they're returning to
shareholders in the form of steadily growing dividend payments.
Although a number of Asian nations
look promising in today's environment, Singapore remains one of my
absolute favorite high-yield hunting grounds.
A tiny city-state made up of 63 islands but with a geographic size
of just 272 square miles, Singapore masquerades as a geographic
midget, but in reality it's an economic giant. The country
has a population of less than 5 million and is less than half the
size of Los Angeles -- Singapore is really a city-state. But
the country is one of the most business-friendly and efficiently
run nations in the world. It's also a developed market
with a high standard of living. On a per capita gross
domestic product (GDP) basis, Singapore ranks above such countries
as Spain, Portugal, and Greece and just behind Italy, Australia,
The government recognized early on that it can't compete with
China on labor costs for manufacturing. Nor can the country
compete with India on price when it comes to certain
services. Singapore instead re-focused its economy on high
value-added industries such as financial services and
technology. As a result, the country has become a key
banking and financial services center within Asia, and it remains
one of the highest volume currency-trading centers in the world.
And the nation is taking steps to make
sure it maintains its competitive edge. Singapore has eased labor
laws, making it easier for needed workers to emigrate there.
Singapore has also enacted legislation to reduce its corporate tax
rate to 18% starting with the 2008 tax year; soon its taxes will
be among the lowest in the world.
Singapore's enviable position at the intersection of various
shipping routes has made its port one of the world's busiest for
300 years. As a result, Singapore's so-called "entrepot"
industry -- duty-free importing and exporting out of the same port
facilities -- provides the nation with a significant source of
income. And thanks to Singapore's proximity to fast-growing
Asian markets like China, the nation is one of the biggest
beneficiaries of booming Asian trade.
Singapore's real estate industry is also
in the midst of an incredible expansion. With limited space,
developers have constructed thousands of new homes, but values
have still shot through the roof, as demand has outstripped supply.
The same scenario has also unfolded in the market for office and
at the overall picture, Singapore's economy is soaring. The
nation's gross domestic product has increased +6-8% annually over
the past four years, with +6.5% growth expected in 2008 -- faster
than almost every other developed economy in the world. If
it manages that rate, then the country's stock market should
continue to deliver robust returns.
Of course, if you've been following Singaporean stocks, then
outsized gains are certainly nothing new. The tiny
city-state has been
one of the world's best-performing markets over the past five
years . . .
MSCI Singapore Index has skyrocketed over +200% since 2003,
delivering annualized gains of +27.6% and trouncing the S&P
500 by a 3-to-1 margin. I expect that outperformance to
continue in the coming years thanks to the implementation of
business-friendly reforms, as well as strong demand for exports to
Capturing Above-Average Yields in Singapore
There are many compelling
reasons to invest in Singapore. Aside
from strong economic growth, the nation is also delivering
abnormally high dividend yields. The average Singaporean
stock is now yielding about 3.5% -- nearly 2X the level seen in
And remember, that's just the average -- many individual stocks in
Singapore are now dishing out yields of 6%, 8% . . . even 10% or
the most recent issue of my premium newsletter --
International -- I went in search of high yields in
Singapore, as well as several other attractive nations in
Southeast Asia. In the process, I profiled some of my
favorite high-yield picks in the region, including a fast-growing
company that is scooping up some of Singapore's most valuable real
estate. Thanks to strong economic growth, real estate prices
and rental rates are booming, helping this firm deliver +49%
revenue growth and an impressive 9.0% dividend yield.
If you'd like to learn the name of this high-yielding Singaporean
real estate play -- plus receive a steady stream of foreign
stocks, funds and other investing ideas with abnormally high
dividend yields each and every month -- then I'd like to extend
you a personal invitation to try my premium international
investing newsletter -- High-Yield International.
this link to learn more.
This Fund Has Paid an
Average Dividend of 24.5% Per Year
If you're looking for both high yields and enormous capital
gains, then you need to learn more about our "Income Security of
the Month" for March 2008.
stable, diversified fund has a long track record of paying some
of the biggest dividends in Wall Street history. In fact, the
fund has paid an average dividend of 24.5% per year over the
past five years -- nearly 12X greater than the yield delivered
by the S&P!
Learn the name of this security!
Fund with a Yield of 7.8%
Carla Pasternak, Editor --
Managed by PIMCO, the world's biggest bond
manager, PIMCO Real Return D (PRRDX, $11.50) has an ultra-safe "AAA"-rated portfolio of U.S.
Treasuries and government agency bonds. About a quarter of the
$14 billion in assets is in Treasury
Inflation-Protected Securities (TIPS). The balance of the portfolio is in U.S. Treasuries,
government-sponsored mortgage-backed securities, corporate
an intermediate-term average duration of about seven years,
the portfolio carries moderate sensitivity to interest
rates. To extract extra yield, the fund manager may buy TIPS
derivatives, which cost considerably less than the bonds
themselves. That leaves more cash to invest in safe, but
higher-yielding, short-term corporate bonds.
Dividend: The fund pays a varying dividend
each month of about $0.04 per share. Over the past 12 months,
regular dividends plus year-end capital gains of $0.375 have
amounted to $0.90 per share. That gives the fund a generous
yield of 7.8% as we go to press.
This fund is sold to retail investors in four ways -- "A"
shares, "B" shares, "C" shares, or "D" shares. Each share class
has a different price structure and charges. We've zeroed in on
the "D" shares as providing the lowest cost and maximum return
potential. A 0.9% management expense fee takes a small bite
out of total returns.
The fund has a dividend reinvestment plan, and for more
information, you can call investor relations at 1-888-877-4626.
The fund requires a minimum initial investment of $5,000.
Performance: Established in April 1998, the fund
has performed in the upper quartile of its category in 1-year and 5-year annual returns. Returns of
+14.8% over the
past year are more than double those of the benchmark Lehman
Brothers Aggregate Bond Index and demonstrate the success of
PRRDX's portfolio strategies.
Outlook: This fund's returns are sensitive to
interest rate changes. Falling interest rates could increase the
value of the bond portfolio and its shares. An unexpected rise
in interest rates could have the opposite effect. The heavy
weighting on inflation-indexed bonds provides protection against
inflation, but the value of these bonds is still affected by
changes in rates.
For example, the fund put in its best year in 2002, when
interest rates were falling, and its worst year in 2006, when
rates were on the rise. Still, given the fund's diverse bond holdings,
the range of trading strategies, and the wealth of management
expertise at PIMCO, we would expect the fund to provide solid
average returns of at least +7% a year over the long-term, in
line with its 5-year average.
Action To Take ---> For
investors with a moderate risk profile, PRRDX should benefit
from today's low interest rate environment and provide a hedge
against inflation risk -- as well as healthy long-term returns.
Additional Investing Ideas
Investor Trivia --
fear the falling dollar, but it can actually help to significantly boost
your overseas returns. Which country has seen the value of its stocks soar
+518% for local investors since 2003 and an eye-popping +1,203% for U.S. investors
-- thanks to the declining dollar?
click on one the links above. After you make your choice, we'll show
you the correct answer on our web site.)
Featured Topic --
Small-Cap Value Stocks Deliver 5-Year
Annual Returns of Nearly +17%
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