An End—And a Beginning

I’m sorry to say this is the last issue of Global Income Edge. We’re ending GIE not because our portfolios didn’t perform well. Our Conservative Portfolio has regularly beaten Standard & Poor’s 500-stock index, and our REIT Portfolio outperformed in today’s volatile market. 

Our thesis of using international investing to generate high dividends was strong, particular in taking advantage of the stability of developed markets combined with the growth of development markets (see the graphic on the next page). And we were even recently honored by our industry peers as the top newsletter in our category. After two years of hard work, we delivered, but unfortunately, I think a general disinterest in overseas investing for income limited the number of subscribers.

I am happy to report that, although GIE is ending, you will be receiving Investing Daily’s Canadian Edge, captained by chief strategist Deon Vernooy. Deon has international experience as a money manager, and his Dividend Champion’s Portfolio is a rich source of income. Plus, Canada is a great investment opportunity right now. So far this year, Deon’s portfolio is up 20%, versus 6% for the S&P 500. And if you like options trades, Deon offers those as well. His first six options trades have closed for an average gain of 43% in just a matter of weeks.

As for me, I’ll be applying our award-winning analysis to the Income Portfolio at Investing Daily’s flagship publication Personal Finance. In this final issue of Global Income Edge, I’ll review the performance of our three portfolios, broken down by type of holding, and provide final guidance on individual holdings. (We’ll keep our portfolios online for three more months.)

The Conservative Portfolio


AmeriGas Partners (NYSE: APU) is a master limited partnership that is the largest retail seller of propane gas in the United States, serving 2 million customers in all 50 states. The company has appreciated 15% since our recommendation and hit our price target. Sell AmeriGas Partners.

Aqua America (NYSE: WTR) shares hit a new all-time high last month after releasing new earnings guidance for 2016. The water utility said that it expects earnings per share to range between $1.30 and $1.35, with the top end above the consensus analyst
estimate of $1.33. The company is now fully valued, having appreciated 15%. Sell
Aqua America

National Grid (NYSE: NGG) has always been one of my favorites, and this U.K.-based utility has proved its worth by holding its value and delivering income, even appreciating during the Brexit vote storm. The utility offers excellent earnings diversification with 65% of its operations in the U.K. and 35% in the U.S. Although the Brexit vote could push down the company’s share price, management believes the affect on earnings should be marginal, even if the U.K. slips into recession. That’s because the utility is guaranteed to earn a return on its infrastructure business, or recover its costs, as it is a regulated monopoly. National Grid is a keeper, and though it’s almost fully valued, we would recommend buying on dips. With a dividend of 4.35%, National Grid is a Buy up to $74.


Management at U.K.-based GlaxoSmithKline (NYSE: GSK) predicted earnings growth of 10% to 12% this year. Sales growth already has improved, with vaccine sales up 14% in the first quarter and sales of consumer healthcare products up 4%. Glaxo has also managed to replace about 70% of the revenue the company lost as a result of generic competition for Advair. As we reported recently, analysts are now forecasting that revenue will increase just over 8% this year and earnings per share could jump 20% in the local currency. At current exchange rates, that would translate into a 4% revenue gain in U.S. dollars and a 6% jump in EPS. With a dividend yield of 5%, GlaxoSmithKline is a Buy up to $54.

Pharmaceuticals giant Merck & Co (NYSE: MRK) is the #1 firm in our recent liquidity ranking and also happens to be our #1 Best Buy in our Conservative Portfolio. With 38 drugs in late-stage development, this firm is undervalued relative to its peers. The firm recently reported continued earnings growth. Buy Merck up to $65.p2 map graphic

Novartis (NYSE: NVS) has been one of the rare disappointments in our healthcare lineup. Europe’s second-largest drugmaker reported in late January that its profits dropped 5% as a result of financial losses in its Alcon eye care unit, and in the second quarter reported that core net income fell 5%. The firm’s forecasts are now routinely missed. We’re tired of empty promises. Sell Novartis. 


AT&T (NYSE: T) has been a stellar example of the advantages of firms with large, diversified network systems that can use their geographic diversity and large balance sheet to keep competitors continually at bay. We believe AT&T will keep cashing in on its telecommunication service offerings in the wake of the DirecTV acquisition, and the result will be higher earnings. Analysts forecast earnings per share will grow 4.5% annually over the next five years. With a dividend of 4.4%, AT&T is a Buy up to $48.

Vodafone (NSDQ: VOD) is a U.K.-based telecommunications company with operations in Europe and developing countries.  Vodafone has a whopping 436 million wireless customers (only China Mobile has more subscribers) who pay a wireless bill each month.  It owns networks in 21 countries and has partner networks in more than 40 others. It pays a steady dividend of 5%. While the company is still evaluating the impact of Brexit, we believe that demand for next-generation telecommunications will continue. Vodafone is a Buy up to $39.

Consumer Staples

Diageo PLC (NYSE: DEO) has delivered a bitter cocktail of mixed results over the years since we added the stock to our portfolio. Spirits makers have typically done well during hard economic times such as these, and we truly thought the maker of Smirnoff vodka, Guinness beer and Johnny Walker whisky, to name a few, would take the edge off a sluggish global economy by delivering steady income and growth. But growth continues to be uneven. With an almost 5% share price gain and an annualized total return of 7%, its time to put a cork in it. Sell Diageo.

Unilever (NYSE: UL) is our #3 Best Buy, and the maker of well-known brands such as Hellmann’s mayonnaise, Lipton Ice Tea and Ben & Jerry’s ice cream. It’s done well for us, giving shareholders an 18% total return since our initial recommendation, but the company has been struggling in a tougher global market environment. Sell Unilever.

Consumer Discretionary

The adding of Luxottica (NYSE: LUX) to the Conservative Portfolio was GIE dipping its toe into a higher-growth sector as a way to evaluate whether Europe and the U.S. were indeed turning the corner, as it appeared late last year. With just under $10.2 billion in revenue last year, Italy’s Luxottica has been far and away the leader in the premium eyewear segment. But the company recently curbed its earnings growth outlook as it invests more than $1.6 billion to revitalize and expand its business. And a management shake-up in the last 18 months hasn’t helped matters. Sell Luxottica.

The Aggressive Portfolio

The Aggressive Portfolio was designed for those with a high risk tolerance and longer investment horizon, and who are seeking higher yield and income growth. We selected industries that had pricing advantages and companies with large balance sheets that have operations in developing and developed nations, which were higher growing as a result, and could achieve higher dividend and growth targets while remaining stable.

Global growth forecasts have continued to be revised downward by the International Monetary Fund in both years that Global Income Edge has been operating, which has hurt the portfolio. With global growth continuing to weaken and the U.S. economy growing a tepid 1.2%  in the last quarter, it’s increasingly likely that the world could fall into a recession.    

Given weakening global growth fundamentals, the Aggressive Portfolio remains a Hold. Beyond that, we have also decided to sell some of our holdings. 


Alliance Bernstein (NYSE: AB) is a U.S.-based, global asset management firm. Most of the assets it manages come from the U.S., but more than a third come from various countries around the world. We’ve liked this company because of its potential to profit in the future from selling its mutual funds and delivering financial advice to growing populations of middle-class consumers in emerging markets. We believe the firm is doing an admirable job, especially considering weak economies around the world. With an 8.32% dividend yield, Alliance Bernstein is a Hold.

Banco Bradesco (NYSE: BBD) is Brazil’s second-largest private bank. Brazilian stocks have rallied 31% this year on bets that a new government will be able to shore up the country’s finances and restore confidence. Certainly, Banco Bradesco has benefited from the new optimism; the bank’s stock is up over 64% year-to-date.  But with the currency weakness in the Brazilian Real, we’ve gone from a dividend yield that was above 9% when we recommended the bank to now under 3%.  This investment is not worth the volatility, headaches and sleepless nights that it has caused from worrying over the nosediving Brazilian economy. Given that the stock is now in the black since our recommendation, it’s time to Sell Banco Bradesco.  

Banco Santander (NYSE: SAN) is one of our original holdings that seems to always be on the edge of breaking out, and then disappointing us. We were excited in February when the bank reported a 70% jump in fourth-quarter profits because its lending business improved and fewer funds were needed to cover potential losses. Then in late July, the bank reported that its profit declined by nearly half in the second quarter on restructuring charges and a contribution to a fund to help finance bank “bail-ins” in Europe. Hold Banco Santander.

HSBC Holdings (NYSE: HSBC) is the world’s fourth-largest bank by total assets and has 6,000 offices in 71 countries. We’ve counted on HSBC’s balance sheet heft and global diversification to reliably deliver its 7.8% dividend yield, even as we have become increasingly concerned about its exposure to Asia in the wake of China’s market collapse. HSBC has almost half of its revenue coming from Europe and North America, where growth is tepid, but its Asia business constitutes almost 40%. Confirming further global weakness, HSBC reported a significant decline in first-quarter profit. For its part, HSBC still believes that Asia will rebound. Hold HSBC.p3 msci world index

Royal Bank of Canada (NYSE: RY.PRS) Preferred Shares are a legacy holding that came to us by way of the acquisition of City National Bank, whose preferred shares we originally recommended before the bank was taken over. After the merger, the bank’s preferred shares were converted to the same yield of 5.5%, which was in line with what City National paid.  Canadian Edge Chief Investment Strategist Deon Vernooy recently expressed his concern about the possibility of a sharp correction in the Canadian housing market, especially in Toronto and Vancouver, and its effect on Royal Bank of Canada’s earnings. Vernooy sold the bank as a result. We believe Deon’s investment analysis is right on. Sell Royal Bank of Canada.

UBS AG Group (NYSE: UBS) is one of those banks that seems to have everything going for it, except a robust global economy.  The world’s biggest wealth manager recently reported a reduced profit in the second quarter, which nonetheless topped expectations, even as the bank has expressed concern that its clients have retreated from transactions given increased volatility in global markets. The bank reported a second-quarter net profit of $1.05 billion. With its global footprint, we believe UBS is best positioned to deliver top investment advice to a new class of middle-income investors in emerging markets. Hold UBS AG Group.

Westpac Banking Corp. (NYSE: WBK) is one of Australia’s four biggest banks and has done a remarkable job of weathering the commodity collapse over the last few years. We had been excited about Westpac’s expansion plans in Asia, and we thought the bank would get a boost from the Trans Pacific Partnership. Alas, the trade agreement is now at risk judging by both presidential candidates’ stated positions. As with HSBC, we advise investors to stop accumulating shares because the global economic picture, particularly in Asia, has become increasingly uncertain. Hold Westpac Banking Corp.


Macquarie Infrastructure (NYSE: MIC) has been part of our Buy American theme and is our #1 Aggressive Portfolio Best Buy. The industrial is a play on America’s efforts to renew its infrastructure.  Macquarie Infrastructure’s businesses include the largest bulk storage terminal business in the U.S., a gas production and distribution business, and a controlling interest in two district energy businesses. Given the world’s crumbling infrastructure, we believe infrastructure renewal is a business investment theme that the world will not be able to ignore in the coming years, particularly when global growth recovers. Hold Macquarie Infrastructure.

ABB (NYSE: ABB) has been our broader, global play on infrastructure renewal. ABB is mainly an automation, robotics and power grid company. Analysts are forecasting spending increases of 3% to 6% per year on vital projects such as roads, communication towers and power grids. ABB has been in a turnaround that is already evident in its revenue, and we have argued in the past that higher earnings will follow. Earnings per share is forecasted to edge up to 95 cents this year from 94 cents in 2015, but analysts predict a huge gain next year—up to $1.16. But as with MIC, given the uncertain global picture, ABB is a Hold.

Hillenbrand (NYSE: HI) is a peculiar company that combines a global industrial equipment maker with a funeral home business. Given a global slowdown in industrial activity, which has hurt Hillenbrand’s process equipment division, and the increase in funeral frugality, this investment increasingly looks shaky. With a modest dividend yield of 2.49% against a share price appreciation of 26% as investors have bid up the stock seeking safety, it seems a good time to take profits. SELL Hillenbrand.

Koninklijke Philips (NYSE: PHG) is a healthcare technology firm that is one of the few companies around the world that has mastered the strategy of reverse innovation—developing products for emerging market consumers with tighter budgets and then selling those same products to developed economies at higher margins. Philips’s global footprint lets it take advantage of reverse innovation because it operates in so many countries that are at different levels of economic development. We’ve seen good growth in the company’s healthcare segments, even as management still evaluates the implications of Brexit. Nevertheless, we don’t advise further accumulation in the stock until a better global economic picture emerges. Hold Koninklijke Philips.    

Seaspan Corp. (NYSE: SSW) is one of those companies with steady earnings over the years that allowed us to overlook that it was a shipping company in Asia, a sector and a region that has suffered heavy declines in the last few years thanks to slowing global growth. In this last quarter the company finally succumbed to global weakness and experienced a sharp drop in profitability.  Sell Seaspan Corp.


PDL BioPharma (NSDQ: PDLI)  turned out to be a disappointment, as the firm has yet to deliver substantive returns on the almost billion dollars of investment into late-stage public and private healthcare companies. Sell PDL BioPharma.     

Intercontinental Hotels Group (NYSE: IHG) had seemed to us like a good investment with the strengthening dollar, improving discretionary income and increased tourism on what appeared to be an improving global economy, particularly Europe.  But that was before the Brexit vote, -terrorism in France and Germany, a coup in Turkey, and an apparent general slowdown in global growth.  With a modest dividend yield of 2.53% and a clouded global economic outlook, Intercontinental Hotels Group is a Sell.

REIT Portfolio

The first collapse in Asia’s markets last year, continued weakness in the U.S. and the Brexit fallout this year, along with the Fed’s renewed dovishness, bolstered real estate investment trusts, as investors sought safe havens.  Since inception, the REIT Portfolio has appreciated almost 10%, and adding annualized dividend yields of 6.14% has made for a total return of almost 17%, which trounced the S&P 500 for the same period by more than 12%.

Healthcare REITs

HCP (NYSE: HCP) is the #1 best buy for Global Income Edge’s REIT Portfolio and has steadily increased dividends for 29 years. The company owns or holds interests in $22 billion worth of healthcare-related properties.  HCP’s stock had been hurt by legal concerns surrounding its HCR ManorCare division, but the firm took a painful write-down in the fourth quarter and recently announced plans to spin off its HCR ManorCare portfolio, which consists of post-acute and skilled-nursing properties, into a separate REIT. This will allow HCP to focus on its core businesses: senior housing, life sciences and medical office buildings. Problem solved. Buy HCP up to $44.

Omega Healthcare Investors (NYSE: OHI) provides financing to the long-term healthcare industry with a particular focus on U.S. skilled-nursing facilities. OHI is our #2 Best Buy in our REIT Portfolio. The company has delivered consistent profitability over the last five quarters.  Buy Omega Healthcare Investors to $45.p5 us reit index

Senior Housing Properties Trust (NSDQ: SNH) has been one of the ugly ducklings of our portfolio.  It has been on hold since last year given concerns over declining occupancy rates in its various properties, particularly in assisted living where there is overcapacity, which has hurt the REIT’s share price. With uncertainties about occupancy rates persisting at some of its units, SNH is a Sell.

Retail and Commercial REITs

EPR Properties (NYSE: EPR) is a good play for when consumers’ disposable income picks up and more dollars are spent on movies and theme parks. Plus, beyond theme parks and movies, its education holdings add to the trust’s stability. EPR has been on a roll with its golf facilities (17) and the increasing number of moviegoers at its megaplexes (37). The company also owns 70 public charter schools and nine entertainment and retail centers, among other holdings. EPR has exceeded our expectations, up 36% since purchase, and is beyond fully valued. Sell EPR Properties.

Realty Income (NYSE: O), our REIT Portfolio #3 Best Buy, owns more than 4,300 commercial real estate properties in 49 states. The company continues to enjoy a tight rental market, with well-known blue chip tenants such as Fedex, Walmart, Walgreens and CVS Pharmacy. It has been a top performer, with a 38% share price gain. Given the increased chances of a U.S. recession next year and slower global growth, we’re concerned about the impact on the retail and commercial sectors. In any case, we think Realty Income is fully valued and then some. Sell Realty Income.

Hospitality Properties Trust (NYSE: HPT) owns hotels and travel centers throughout the United States, Puerto Rico and Ontario, Canada. HPT has for a long time been experiencing share price declines because of  the weak U.S. domestic travel industry, but as Americans have started to ramp up vacations and business travel, the company’s fortunes have improved. We’ve waited for the company’s share price to come back into the black, and it’s done so just in time, too, considering the increased odds of a U.S. recession next year that would hurt tourism and travel. Sell Hospitality Properties Trust.

Mortgage REITs

Starwood Property Trust (NYSE: STWD) is the nation’s largest commercial mortgage REIT, investing in and originating commercial real estate debt.  When we added Starwood to the portfolio, we thought it was the ideal investment to weather Treasury rate increases,  but global weakness and a terrible share price performance (that has somewhat recovered) have us rethinking that strategy. Sell STWD.

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