Top Income Investor Still Likes Equities

Ed Perks, whose Franklin Income Fund is in the top 2% of funds in its class over the past five years and the top 4% over the past ten years, according to Morningstar, is continuing to find the strongest opportunities for income in the equity market. Perks tells WealthTrack’s Consuelo Mack that over the past few years, the fund’s allocation has flipped from about 65% fixed income/35% equities to close to 65% equities and 35% fixed income. He thinks rising rates aren’t necessarily a bad thing if they occur as part of a normalization process, and he sees large dividend payers as one area that is generally attractive, though he says his fund looks at investments from a bottom-up, investment-by-investment view. He’s particularly high on certain utilities with steady cash flows, and says his fund has found more opportunities in energy, materials, and tech stocks as it has increased its equity exposure. He thinks declining growth projections and the accompanying market volatility in emerging markets made for good opportunities in materials and energy stocks.

Does Buy-and-Hold Reduce Risk?

How do you reduce risk in your investment portfolio? Most people try to do so by diversifying their assets and avoiding stocks when fears are high. But new research indicates the best risk-reducing measure is to buy stocks — and hold them, Marketwatch’s Chuck Jaffe says. Continue reading

Herro on 2014, and What Japan Needs To Do Now

Top fund manager David Herro says that, while stocks jumped far more than most expected they would in 2013, they still should have room to run going forward.

“Despite the strong past performance of global equities, I believe there is still value in global equity markets,” Herro writes in his fourth-quarter letter to Oakmark shareholders. “Certainly, stocks are not selling at the incredible bargains they were in early 2009 or even early 2012, but with global economic growth appearing to be poised to accelerate, and with stock valuations that are still attractive, I believe there are reasons to be confident that global equities will continue to be an attractive asset class.”

Herro, whose funds profited greatly from overweight positions in Japanese firms last year, says the big gains seen for Japanese stocks has led to him paring back on those positions. “Since the low of the Topix in 2012, the market climbed around 80%!” he says. “As a result of the extremely strong uplift in prices, our holdings became less undervalued and caused us to trim some of our positions.  Given that prices rose faster than corporate value creation, by the end of 2013, we were actually well underweight in the Japanese equity market.”

Herro talks more about the corporate changes going on in Japan, and what he thinks is needed for the country to continue its progress. “I believe that in order for the economic recovery to endure, the Japanese government needs to implement real structural reform,” he says. “This means that Japan’s government must complete at least three steps: take away protections from specific industries, like agriculture; remove impediments to productivity and workforce growth; and take away the barriers to mergers and acquisitions within corporate Japan.”

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Faber on Discipline and Diversification

Marc Faber of the Gloom, Boom & Doom Report is worried about inflation given the Federal Reserve’s massive money printing efforts. But he doesn’t think diving headlong into gold and/or real estate is the best move. Faber tells FOX Business Network that he thinks investors should still use a diversified strategy, owning stocks, real estate, gold, and bonds as part of a disciplined approach. He also talks about his belief that US growth had been driven mainly by deficit spending and money printing.