- Focus on safe yield: High-quality corporates (non- cyclical, high cash reserves, minimal refinancing needs). Corporate balance sheets are in very good shape.
- Equities: focus on reliable dividend growth/yield; preferred shares (“income” orientation).
- Whether it be credit or equities, focus on companies with low debt/equity ratios and high liquid asset ratios — balance sheet quality is even more important than usual. Avoid highly leveraged companies.
- Even hard assets that provide an income stream work well in a deflationary environment (i.e., oil and gas royalties, REITs, etc…).
- Focus on sectors or companies with these micro characteristics: low fixed costs, high variable cost, high barriers to entry/some sort of oligopolistic features, a relatively high level of demand inelasticity (Utilities, Staples, Healthcare — these sectors are also unloved and under owned by institutional portfolio managers).
- Alternative assets: allocate significant portion of asset mix to strategies that are not reliant on rising equity markets and where volatility can be used to its advantage.
- Precious metals: A hedge against the reflationary policies aimed at defusing deflationary risks — money printing, rolling currency depreciations, heightened trade frictions, and government procurement policies.
Wednesday, October 12, 2011
Rosenberg Daily - SIRP Investing
INVESTMENT STRATEGY: SAFETY AND INCOME AT A REASONABLE PRICE (S.I.R.P)