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Mark Keisel Tells Us How To Identify 'Diamonds In The Rough' (Advisor Perspectives)
PIMCO's Mark Keisel told Advisor Perspectives that there are still opportunities for yield and total return in the credit markets. He said housing and energy are poised for above average growth and explained how to identify these 'diamonds in the rough'.
"A 'diamond in the rough' is a credit that is under-covered, or not actively followed or researched by many investors. It can also be a company where few see near-term upside.
"At PIMCO, we identify these opportunities through our top-down and bottom-up investment process. We drill down, looking for countries, industries and companies with above-average growth potential. We ask ourselves: What’s driving a country’s growth? Is that growth sustainable? Which industries are poised to grow faster than their overall economies? And finally, which companies are likely to be the fastest growers within their industries? In a low-growth environment, we’re looking for companies that grow free cash flow to pay down debt."
Part of Finra's complaint against Charles Schwab has been dismissed. A hearing panel ruled that the regulator can't prevent the brokerage from requiring that its clients settle disputes through arbitration and make require them give up their rights to participate in class-action lawsuits.
The panel said Schwab's provision violates Finra's rules, but it can't enforce it because it clashes with federal arbitration laws.
Often when things get rough investors run to the sidelines. A new report from Fidelity Investments says this is possibly one of biggest mistakes an investor can make. Fidelity's Steve DuFour says, "If you focus on fundamentals rather than noise, you can use volatility to your advantage".
JP Morgan's chief U.S. equity strategist Tom Lee is typically bullish on stocks, but now, he says there are three key reasons to move to the sidelines.
1. The headlines are turning negative and macro risks are on the rise. 2. Investor sentiment is too high. 3. The choppy trading in corporate bonds is "providing less support for rising equity prices".
He also tells clients not to buy more stocks until the S&P 500 falls 50 - 100 points.
Marc Faber said the stock market has peaked and that bonds may be on their way to a rebound.
"I think we have made an intermediate top, and it could be a longer-term top. ...I don't think the market is as overbought as it was in '87, so I don't expect a crash. But I think for the time being, the market has peaked out, and I think in the meantime, bonds, which are extremely oversold, could rebound.
"...But I think that the market has now become quite overbought and that is very significant or overextended, bullish sentiment. Everybody says, 'Sell bonds, buy equities.' And when everybody thinks alike, one has to be careful."
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