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DHS: Strong Dividend, Intelligent Holdings, Solid Sector Allocations

Summary The dividend yield is a strong 3.41%. The holdings include several established dividend champions which gives the portfolio a more durable feel. The sector allocations look respectably defensive which is a positive when I would consider the market to still be moderately expensive. The Federal Reserve pushing short rates higher could help the financial sector generate more interest income. The WisdomTree Equity Income ETF (NYSEARCA: DHS ) hits very well on 3 of 4 categories. The only weakness in this fund is the expense ratio. The dividend yield, holdings, and sector allocations create a very compelling trio of factors in favor of the ETF. Expenses The expense ratio is a .38%, which is fairly standard for several of the WisdomTree (NASDAQ: WETF ) funds I’ve looked into. Dividend Yield The dividend yield is currently running 3.41%. This is simply excellent, no complaints there. Holdings I grabbed the following chart to demonstrate the weight of the top 18 holdings: (click to enlarge) General Electric (NYSE: GE ) has had a disappointing several years as their strong dividend has not been matched with solid share price growth. However the company has been very active in looking for solutions and even took measures as extreme as turning one of their departments into Synchrony Financial (NYSE: SYF ). To be fair, it is unclear to me why the finance division that turned into Synchrony Financial was supposed to fit with the rest of the company at GE. Exxon Mobil (NYSE: XOM ) and Chevron Corp (NYSE: CVX ) both get heavy allocations and have huge dividends. Oil is extremely “out of favor” right now, but I expect an eventual comeback. If it never comes, at least the oil for my truck will be fairly cheap. Two of the highest holdings go to the telecommunications sector with AT&T (NYSE: T ) and Verizon (NYSE: VZ ). I’ve found those allocations to be fairly risky given the aggressive competition in the telecommunications industry, but there are some positive aspects to doing a heavy allocation here as it aligns part of the risk with the investor’s expenses. If T and VZ are having a hard time covering their dividend, it would indicate that the profits within the telecommunications industry had dried up and would suggest that the investor is probably saving a chunk of money on their cell phone bill each month. McDonald’s (NYSE: MCD ) is another holding that I think should be represented in most dividend growth portfolios in one way or another. While their burgers have left a great deal to be desired over the last few years, they have still been able to remain relevant because they collected a large amount of high quality real estate. Over the last earnings report things began to look materially better for this real estate giant disguised as a seller of cheap burgers. Phillip Morris (NYSE: PM ), Altria Group (NYSE: MO ), and Coke (NYSE: KO ) all sell products that kill people, but they continue to deliver sales and earnings and the earnings are used to pay some fairly attractive dividends. I know some investors might think I’m crazy for tossing Coke in there with the tobacco companies, but high fructose corn syrup has quite a few very damaging health effects and heart failure is a major source of death in the United States. You won’t see me protesting the stable dividend though. Sectors Financials get a heavy weight which might be a good thing with the Federal Reserve working so hard to raise rates and justify paying interest on excess reserves when the rest of the world is shifting towards further rounds of quantitative easing or NIRP (negative interest rate policy). We have learned over the last few years that negative nominal returns and negative real returns are very possible because simply holding onto cash creates other problems. It turns out that protecting cash is not free and that banks can be pushed to accept negative interest rate policies. That’s interesting and it suggests there will be quite a few books on macroeconomics that need to have chapters replaced. The heavy allocations to consumer staples and energy look good in my opinion since I like the defensive nature of the consumer staples sector and appreciate the energy exposure as demonstrated in my comments on XOM and CVX. The three defensive sectors are consumer staples, utilities, and health care. Those three are all present in the top 6 allocations, so this looks like a respectably defensive fund. Since P/E ratios are fairly across most of the market, I prefer a defensive portfolio to an aggressive portfolio. Conclusion Great dividend, mediocre expense ratio, great holdings, and great sector weightings make a fairly attractive portfolio. If the expense ratio were lower it would get some very serious consideration from me. This fund simply performs great on several metrics.

Invest In The Philippines – Buy The IShares MSCI Philippines ETF

Summary High growth English speaking economy entering the demographic window and with great jobs growth. Very low household debt at 6% of GDP and a strong property market. The PSEi has moved sideways in 2015 providing a nice entry point now. The Philippines has been undergoing rapid change in the past decade and is set to continue as they enter the “demographic window.” It is one of very few countries in the world that speaks perfect English and still has cheap labor. But first some key reasons to invest in the Philippines stock market; GDP growth at 5.6% pa – the third fastest in Asia. Strong domestic driven economy not very affected by the China slowdown, with resilient overseas remittances. Rising middle class, and very strong demographics. The stock market has recently retreated and valuations are now better or fair. The Philippines GDP growth target set by the Government is for 7-8%pa growth. Other countries once they have entered the demographic window have posted an average growth of 7.3% during the first 10 years. According to the IMF the Philippines is currently growing at 6.0% in 2015, and forecast for 6.3% in 2016. The two main drivers of the Philippines economy are Overseas Foreign Workers (OFWs) remittances, and Business Process Outsourcing (BPO), which mostly covers call and data/back office processing centers. OFW remittances are growing around 6%pa , contributing $25b in 2014. The BPO sector is growing rapidly around 15%pa, contributing $18.9b in 2014, and employing over 1m people. It is expected that BPO revenues will overtake OFW remittances by around 2017 . Add to this a growing tourism and manufacturing sector (mostly electronics) and some agricultural exports and the economy is very resilient. With strong money inflows into the Philippines and rising jobs the property sector is also booming. There is a massive pent up demand for housing, and household debt is extremely low at a mere 6% to GDP. As a result the property developers (Ayala ( OTC:AYAAY ), Robinsons, SM) and the major banks (BPI, BDO, and Metrobank) are also booming. The banks are making good net interest margins around 3.02% , and growing their loan books 20% pa, with non-performing loans at a very low 1.8% and double digit profits. Total Philippines debt is relatively good. According to McKinsey research : The Philippines is one of the few countries in the world that has seen deleveraging. The ratio of total debt-to-GDP has been flat since 2008. In fact, it has declined if we look as far back as 2000. Corporates have the highest share of debt as a percentage of the economy at 71%, followed by the government at 40% and households at 6%. The current Government seems to have reduced corruption, and has brought the Government debt down and increased infrastructure spending. Source The Demographic Window In 2015, the median age in the Philippines is only 23.4 yo. The “demographic window”, is loosely defined as a period when a great majority of the population are of working age. The Philippines working-age population (between 15 and 64 years old) this year (2015) accounts for 66.6 percent of the total population of 101.6 million. By 2020 this will have reached 68% and by 2030 70.6%. Source Living here in metro Manila, I can certainly testify that the growth is real. Everyday I see Filipinos rising into new employment (maybe a call centre, or property agent), buying a smartphone, and buying condos. Jobs ads are often for 500 workers at a time. Manila skyline is changing rapidly under a construction boom. New cities within Manila have been growing and continue to be planned such as the Mall of Asia Entertainment (Casino) City , the Las Vegas of Philippines. Currently being built it will provide 4 new casinos, 6,000 hotel rooms, and 1.8m new jobs for the whole of Entertainment City. Global City (within Manila) is a whole new international business district that has grown from nothing in a mere decade. Global City Skyline Source The Philippines Stock Exchange (PSE) Index (PSEi) The best way, in my opinion, to invest in the Philippines stock market is to buy the index. The PSEi is currently at 6,932 down 2.93% for the past year, and the index has a year low of 6,603 and a high of 8,136 (see graph below). (click to enlarge) Source The PSEi trades on a current PE of 19.88. iShares MSCI Philippines My recommendation for Americans and most international investors would be to simply buy the index using the iShares MSCI Philippines ETF (NYSEARCA: EPHE ). The index is well diversified with the largest sectors being property developers and banks. The top 5 holdings are Ayala Land, Philippines Long Distance Telecommunications (NYSE: PHI ), Universal Robina Corp. ( OTCPK:UVRBY ), JG Summit ( OTCPK:JGSMY ), and SM Prime ( OTC:SPHXY ). If you want exposure to one of the fastest growing economies in Asia and the World, with brilliant demographics and a rising middle class, with strong jobs growth, at a reasonable valuation then EPHE is a great long term investment. Risks The usual risks apply to emerging markets. Currency risk would be the main one to consider. Also there will be an election in 2016 and a new Government. Geo-political risk is another with recent South China Sea issues with China.

12 Top Picks From Buffett And Others

Summary Here is what top funds own in the latest quarter. Opportunities remain in these positions. Here are some of the best ideas. Media General (NYSE: MEG ) While the long term is what really matters, Warren Buffett has returned 1,826,163% since 1965 which is a strong start by any measure. If he can keep this up in the second half of his career, he could literally end up with all of the money currently in the world. Buffett’s Berkshire Hathaway ( BRK.A / BRK.B ) owns 3.4 million shares of MEG. It is up over 4% since this position was first disclosed on StW . If you would like to read more about it, you might like Catalysts Drive Media General’s 20% Upside . Additionally, we discussed it in Is Nothing Sacred? Rangeley Podcast #2 . It currently costs under $16 and will probably be sold for over $17 in a deal announced before yearend. Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it’s all about. – Warren Buffett It has been a busy quarter for Berkshire. They doubled their position in Phillips 66 (NYSE: PSX ). Berkshire’s Todd Combs and Ted Weschler added to Axalta (NYSE: AXTA ), Liberty Media ( LMCA / LMCK ), Liberty Global ( LBTYA / LBTYK ), 21st Century Fox (NASDAQ: FOXA ) and Charter (NASDAQ: CHTR ). Folks in Omaha are substantially overlapping with John Malone these days. In terms of stock sales, Berkshire reduced its exposure to Chicago Bridge & Iron (NYSE: CBI ). A number of other positions were the result of corporate events as opposed to active trades. For example, Buffet now owns over 325 million shares of Kraft Heinz (NASDAQ: KHC ) as a result of the successful completion of the merger between Kraft and Heinz. Berkshire has held onto the 59 million shares of AT&T (NYSE: T ) that they received as a result of its acquisition of DirecTV. John Malone, the perpetual new ticker generator, recently created the new Liberty Global Latin American ( LILA / LILAK ) tracking stocks. Berkshire received these as a result of their Liberty Global stake. The Berkshire portfolio is active in terms of ongoing corporate events in the latter half of 2015. They own 10 million shares of Charter after increasing the size by 21%. Charter is wading through the regulatory process of acquiring Time Warner Cable (NYSE: TWC ). They own 4.2 million shares of Precision Castparts (NYSE: PCP ) which Berkshire is in the process of acquiring. There is a $4.02 net arbitrage spread which offers a 6% annual return if they close the deal by next March. No impediments are expected to delay or threaten the deal’s closing. They own 30 million shares of Suncor (NYSE: SU ) which recently launched an unsolicited offer for Canadian Oil ( OTCQX:COSWF ). While Buffett is not a fan of hostile bids, his portfolio companies do not necessarily share his dislike. M&T (NYSE: MTB ) is a 5.3 million share position for Buffett. It is integrating its recently completed acquisition of Hudson City Bancorp. Liberty Global is buying Cable & Wireless ( OTCPK:CBWYY ). Berkshire owns 19 million shares of Liberty Global. Finally, Berkshire has about 11 million shares of General Electric (NYSE: GE ) which is refocusing on its industrial portfolio through a series of major asset sales. What’s next after the PCP deal closes? Another collaboration with 3G on the horizon? We could see another food or beverage deal within the next year that breaks their prior record for scale. ChipMos (NASDAQ: IMOS ) Seth Klarman , one of history’s greatest investors, added 14%% to his position in IMOS, taking it to about 3.8 million shares for his fund, Baupost Group. IMOS is up by over 19% since it was first disclosed on StW . For background reading on this idea, please check out 30% Underpriced? How Is The Market So Wrong About ChipMOS? It is still a compelling long opportunity worth substantially more than it costs. Value investing is at its core the marriage of a contrarian streak and a calculator. – Seth Klarman Greenlight RE (NASDAQ: GLRE ) David Einhorn’s annual returns have been about 19% per year. I highly recommend his book, Fooling Some of the People All of the Time , to any investor, especially one interested in short ideas. Greenlight is down over 17% this year. One way to get exposure to a potential recovery would be to buy Greenlight RE . Its book value per share was $23.29 at the beginning of the quarter. When someone doesn’t want you to look at traditional metrics, it’s a good time to look at traditional metrics. – David Einhorn Allergan (NYSE: AGN ) Stephen Mandel, who used to work as a consumer analyst at Julian Robertson’s Tiger, added 13% to his Allergan position. His hedge fund, Lone Pine Capital, owns about 2.6 million shares. AGN is in a deal with Pfizer (NYSE: PFE ) in which AGN holders will get about $363 per share in PFE equity. Even with a wide spread, the deal is worth between $310-325 per AGN share. Pershing Square Holdings ( OTCPK:PSHZF ) Bill Ackman’s Pershing Square is down about 25% year to date. One way to get exposure to a potential recovery is via a long position in Pershing Square Holdings. Its NAV/share was $19.92 while its price was $19.45 as of November 17. Aercap ( AER ) Lee Ainslie has compounded at around 14% per year for two decades. He added 9% to his Aercap position which now stands at 4.9 million shares in his hedge fund, Maverick Capital. For background reading on AER, I recommend Aercap: An Incredible Bargain Hiding In Plain Sight, 40-50% Upside (For Starters) , winner of a recent Seeking Alpha investing competition . Danaher (NYSE: DHR ) Dan Loeb has annualized at over 20% for over 20 years. In a new position, his fund, Third Point, owns 2.3 million shares of DHR. DHR underwent a complex series of transactions this year. The split into two companies will be finalized by the end of next year. The two key managers, Mitch and Steven Rales, will each serve on both boards. This is crucial as they have proved to be among the very best asset allocators among many corporate insiders. It is up over 13% since it was disclosed in StW earlier this year. For further reading on this idea, I recommend Better Than The Berkshire Hathaway? Danaher’s Value . Our philosophy is to be opportunistic all the way across the capital structure from debt to equity, across industries and different asset classes. – Dan Loeb Altera (NASDAQ: ALTR ) John Paulson was the single greatest exploiter of the price opportunities presented by the housing finance bubble. What is he up to this year? In a new position, his hedge fund, Paulson & Co., recently bought about 3.5 million shares of ALTR. The $1.45 net arbitrage spread currently offers a 7% annual return if the deal closes by next April. It is up over 28% since first discussed on StW . If you want to learn more about this opportunity, then click on 6% Yield From Intel’s Deal With Altera . Baker Hughes (NYSE: BHI ) Jeff Ubben is one of the greatest activist investors of all time. His ValueAct Capital owns over 37 million shares of Halliburton (NYSE: HAL ) and 23 million shares of BHI. He supports their merger and could substantially benefit from the 73% annual return from the arbitrage spread if the deal closes by next March. Cigna (NYSE: CI ) Leon Cooperman’s Omega Advisors has earned an annualized net return of about 11% since inception. His fund owns about a quarter of a million shares of CI. He will benefit from a 42% annual return if CI’s sale to Anthem (NYSE: ANTM ) closes by next August. Time Warner Cable One of Chase Coleman’s forefathers, Peter Stuyvesant built the wall in Wall Street. He has compounded at over 21% since inception. TWC is a new position of Chase’s Tiger Global hedge fund. He newly owns about 580,000 shares. The $17.83 net arbitrage spread offers a 26% annual return if the deal closes by next April. It is up over 35% since we disclosed our position in this equity. You can read more about it here . Humana ( HUM ) After Larry Robbins came out of Leon Cooperman’s Omega Advisors, he turned Glenview Capital into a spectacular success. With over 6.6 million shares, his largest position is HUM. After adding 1% to this position over the quarter, it is now about 6% of his portfolio. Robbins has probably been the greatest beneficiary of the Affordable Care Act, racking up massive profits on his investments in health insurers. There will be more to come if the Aetna (NYSE: AET ) deal to acquire HUM slips past its antitrust review. There is a 38% annual return if it closes by next August. As he also owns 5.5 million shares of AET, his position in the combined company will still be substantial if and when the deal closes. Briadcom (NASDAQ: BRCM ) Andreas Halvorsen’s Viking Global has returned an average of 13% over the past ten years. One big new position of his is BRCM. He owns almost 24 million shares. He will benefit from a 13% annual return if BRCM’s sale to Avago (NASDAQ: AVGO ) closes by next February. It is up over 13% since we disclosed our position in this equity. You can read about the details here . Solarwinds (NYSE: SWI ) Andrew Spokes’ Farallon Capital is one of the largest and best funds that focuses heavily on risk arbitrage. His fund recently started a new position in SWI. Today, he owns about 2.4 million shares. The arbitrage spread offers an annual return of about 13% if it closes by next March. It returned about 22% since we disclosed our position in this one. If you are interested in learning more, you can get the details in this edition of M&A Daily . Icahn Enterprises (NASDAQ: IEP ) Carl Icahn has defined the role of activist investor since it was called “corporate raider”. I prefer the name “owner”. His Icahn Capital owns 115 million shares of IEP; the last I heard, he is satisfied with management. IEP is 28% of the portfolio, up 2% in the past quarter. IEP is down about 28% since I disclosed it as a short earlier this year. I like Icahn. However, he is on the long, long list of people that I do not want to pay a premium for. There’s a strategy behind everything. Everything fits. Thinking this way taught me to compete in many things, not only takeovers but chess and arbitrage. – Carl Icahn Exits One of the big exits of this past quarter was DirecTV, which was sold to AT&T . This was a top position of many funds including mine. Next Ideas What are the best ideas for 2016? We will disclose our #1 candidate in early December on StW . Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.