This week'sinvestment idea comes with a 9%yield , and a deep
contractbacklog tofund its payouts. More on that in a minute.
First, let me introduce you to the source of the recommendation
-- Elliott Gue.
If the name rings a bell, there's good reason.
The stockmarket strategist has appeared on CNBC and Bloomberg
TV, and has been quoted in Barron's, Forbes and the Washington
Post. Elliott's expertise and track record of success have also
made him a sought-after speaker atinvesting conferences hosted by
the American Association of Individual Investors (AAII) and
Elliott is one of the most widely followed and respected
analysts in the United States, with particular expertise in the
And now he's the newest member of StreetAuthority's stable of
Starting with the Januaryissue of
, Elliott's in charge. It's a good match.
The mission of High-Yield International is to bring readers the
highest-yielding, fastest-growing -- and safest --investments
outside the United States, carrying on a tradition of delivering
And in meeting that challenge, Elliott has years of experience
with international investing to draw upon.
Elliott earned his bachelor's and master's degrees from the
University of London. In the early 2000s, Elliott was associate
editor of an international investing-focused newsletter called
In 2006, he co-authored a book entitled
"The Silk Road to Riches: Investing in Asia's Newfound
which focused on the growth inemerging markets .
One of his first international high-yield picks was global
, which at the time yielded about 4%. From the end of February 2002
through the end of November, that stock was up about 260% including
dividends, far outpacing the 59% gain in the S&P 500 over the
same time period. (Diageo has also been a top performer in
High-Yield International's "Reliable Income" portfolio since
Elliott also has an affinity for the international energy
markets (which themselves are great fodder for yield-focused
investors). He launched the highly acclaimed Energy Strategist
newsletter in March 2005. Three years later, the official program
of the 2008 G-8 Summit in Tokyo referred to Elliott as "the world's
leading energy strategist."
Elliott's transition to
will be a smooth one, due in part to the fact that his predecessor
isn't going anywhere.
StreetAuthority co-founder Paul Tracy -- an investing expert in
his own right -- took the helm at
two years ago. At present, 93% of the holdings in the advisory's
two model portfolios are showing positive returns, with a hefty
majority beating the S&P 500 by sound margins.
But Paul became a victim of his own success. During the same
two-year period, StreetAuthority -- the company Paul still actively
manages -- was growing at a frenetic pace. StreetAuthority's paid
subscriber base doubled, and global readership increased by
hundreds of thousands.
Paul increasingly realized it was necessary to devote more of
his time to managing that growth, along with several other major
initiatives at the company -- a decision that became easier when
Elliott became available.
I sat down with StreetAuthority's newest analyst this week and
asked him to share with Insider readers his perspective. And, not
to worry -- I haven't forgotten about that 9%-yielder I mentioned
at the start of today's issue...
You seem to eat, sleep and breathe international investing. What is
your investment process?
I generally have a top-down approach to investing. That means I
start by assessing the global economic outlook andmarket trends
underway in key countries and regions. I keep an eye on the
economic data that's released each trading day and monitor key
political and economic policy changes. I then drill down further to
look for industry groups and individual names that stand to benefit
most from those trends.
For example, the Japaneseeconomy is currently mired inrecession
and the country's widely-watchedbenchmark index , the Nikkei 225,
underperformed the S&P 500 for most of 2012.
But in mid-October Shinzo Abe, the leader of the Liberal
Democratic Party (
), promised to increase government spending and push the
nation'scentral bank to adopt aninflation target of 2% if the LDP
returned to power. Abe advocated the use of unconventionalmonetary
policy such as additional quantitative easing and, potentially,
negative interest rates to enddeflation in Japan.
After that announcement the Nikkei has soared -- since the end
of October alone the Nikkei is up nearly 8%, outperforming the
S&P's paltry 2.7% return. After Abe's landslide victory on
December 16, I see the new government enacting plenty of policies
that will bebullish for Japanese stocks in the new year.
Another example is Europe. European stocks have underperformed
stocks in the United States for nearly three years due to the
ongoing financial crisis in countries like Greece, Portugal, Italy
But in September, the European Central Bank (ECB) announced a
plan to buybonds issued by troubled EU countries to drive down
borrowing costs. The result: A dramatic outperformance for European
stocks and a rising euro that's pushed up returns. Europe also
looks likely to emerge from its recession by the middle of
I will be examining some of the best positioned income stocks in
EU for the January issue of High-Yield International. But don't
worry, they all trade on U.S. stock exchanges.
Where do you see the most opportunities for income investors in the
Now is the time to be focused on investing in foreign markets. The
U.S. fiscal cliff has created significant uncertainty for the
economy in the first half of next year.
While some sort of deal to avert the fiscal cliff is eventually
likely, any agreement will probably involve some spending
reductions and tax hikes that will tend to slow down the U.S.
economy. That means some of the best opportunities to buy
high-yield stocks lie outside the United States.
For example, the European central bank's efforts to bring down
borrowing costs in countries such as Italy and Spain is starting
tobear fruit. Recent economic data shows signs of improvement in
Europe's largest economies, and stocks in the EU are starting to
outperform their U.S. counterparts. Moreover, just as in the United
States, many larger EU companies are multinationals that generate
the majority of their sales outside the continent. Some of these
firms have been unfairly punished simply because they happen to be
headquartered in Rome or Paris.
China will also be an interesting investment story in 2013. The
Chinese economy has slowed. However, much of the slowdown reflects
the Chinese government's efforts to reduce inflation and cool
downspeculation in the domestic property market. But with Chinese
inflation well under the government's targets, China has cut
interest rates, reducedreserve requirements and stepped up spending
on infrastructure to shore up growth.
These efforts are already beginning to pay off as recent
economic data out of the world's second-largest economy has
improved over the past three months. Recent manufacturing surveys,
for example, suggest growth will rebound to around 8% in 2013. This
is good news for Chinese firms but it's even better news for
companies in countries like Australia that are important suppliers
of raw materials such as iron ore, coal and oil to the Chinese
What's your top high-yield international recommendation right
One of my current favorites is
. Seadrill is a contract drilling firm that owns a fleet of 66 rigs
used for drilling oil and gas offshore. Seadrill's fleet consists
of 24 drillships and semisubmersible rigs used for drilling
deepwater plays, 21 jackup rigs used for drilling in shallow water
and 21 tender rigs used to conduct drilling from fixed or floating
offshore platforms. Demand for deepwater drilling rigs has been
robust over the past two years as major energy producers ramp up
their activity in response to higher oil prices.
In addition, exploration success in regions including offshore
Brazil, West Africa, the Gulf of Mexico and East Africa have
encouraged further drilling activity and have led to a shortage of
deepwater rigs, particularly those capable of handling depths of
10,000 feet or more. As a result, the dayrates for contract
drillers has risen to as much as $650,000 per day for the most
capable rigs, from around $450,000 per day in late 2010.
The market for jackup and tender rigs is also beginning to
tighten. In particular, the market for premium deep water jackups
capable of drilling in harsh environments such as the North Sea is
now 95% utilized, meaning that virtually all rigs are currently
drilling under a contract.
Seadrill contracts most of its rigs under longer-term deals that
allow it to lock in fixed dayrates and generate a reliable stream
ofcash flows to pay dividends. Currently, the stock pays adividend
of 85 cents per quarter, equivalent to a yield of 9%. And with
several new rigs currently under construction due to be delivered
and placed under contract during the next few years, there's upside
to those dividends over time.
And, since Seadrill is incorporated in Bermuda, there are no
withholdingtaxes for U.S.-based investors. I'd be a buyer at any
price under $45.
Elliott's addition to
can't be overstated. I can't think of an analyst more prepared to
take over what has become StreetAuthority's best-performing
advisory (more than 90% of the portfolio holdings are showing a
What Elliott will have is a tailwind. International stocks tend
to pay higher yields than their U.S. counterparts. Consider this:
Out of the 155 profitable companies that pay yields more than 12%,
only 22 of them are located in the United States. That means
more than 86% of the world's high yield opportunities are
You can learn more about this phenomenon --
including the full list of 22 U.S. stocks paying
by following this link.
Is your bank one of the safest in America? According to
analyst Sara Glakas, only 383 of them make the grade. Find
out if your bank is on the list
How will silver fair in 2013? According to StreetAuthority
analyst David Sterman, two major catalysts could push the
metal to $40 and beyond -- a 20% gain from where it is
today. For more information about how we think silver will
perform in the coming year, you can
follow this link here.
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