With bond prices slumping, Mark Hulbert, editor of Hulbert Financial Digest, asked top-performing financial newsletter editors for their choices as alternatives to bonds.
The editors listed business development companies, utilities, energy concerns and real estate investment trusts (REITs).
Hulbert sees his exercise as an important one. "The search for bond alternatives is urgent," he wrote in
The Wall Street Journal. "Interest rates almost certainly will rise this year as the Federal Reserve continues scaling back its massive stimulus program."
Editor’s Note: These 38 Investments Have a 96% Win Rate
Hulbert spoke with some of the top-performing editors of the last 15 years.
Stephen McKee, editor of No Load Mutual Fund Selections & Timing, placed first. He recommends business development companies MCG Capital and MVC Capital. They sport dividends of 11.2 percent and 3.99 percent, respectively.
Roger Conrad, editor of Conrad's Utility Investor, took second. He suggests AGL Energy, an Australian utility that yields 4.2 percent; RioCan Real Estate Investment Trust, a Canadian REIT with a 5.9 percent dividend; and Kinder Morgan Energy Partners, a master limited partnership with a 6.6 percent yield.
Gary Cardiff, editor of the Sound Advice, ranked third. He cites four REITs: Associated Estates Realty, CommonWealth REIT, Hersha Hospitality Trust and Retail Opportunity Investments. They have a 4.4 percent average yield.
While none of the editors recommended getting out of bonds completely. Instead, they suggested keeping maturities short, Hulbert noted.
Meanwhile, Morningstar passive funds strategist Samuel Lee takes a dim view of REITs.
"REIT expected returns are now much lower than they were for most of their history," he wrote on
Morningstar.com.
"Unless you're optimistic that REITs can grow per-share dividends at above the rate of inflation, overcoming their structural inability to retain earnings, REIT real returns will likely disappoint."
Editor’s Note: These 38 Investments Have a 96% Win Rate
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