Tag Archives: stocks

3 Strong-Buy American Funds Mutual Funds

American Funds – a segment of Capital Group – currently has nearly $1 trillion assets under management invested in mutual funds across a wide range of categories including both equity and fixed-income funds. The company generally focuses on providing long-term returns to investors. American Funds claims to have managers with an average of 27 years of investment experience. Meanwhile, its parent company, Capital Group, which currently has around $1.4 trillion assets, is one of the biggest investment management organizations of the world. Founded in 1931, the company offers a wide range of financial services all over the world through its offices in different regions including North America and Europe, and 7,000 associates. Below we share with you 3 top-rated American Funds mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all American Funds mutual funds, investors can click here to see the complete list of American Funds mutual funds . American Funds New Perspective A (MUTF: ANWPX ) seeks long-term capital appreciation. ANWPX invests in companies throughout the globe in order to take advantage of changes in factors including international trade patterns and economic relationships. ANWPX primarily focuses on acquiring common stocks of companies that have impressive growth prospects. ANWPX may also invest in companies that are believed to pay dividend in the future to generate future income. The American Funds New Perspective A fund returned 5.1% in the past one-year period. ANWPX has an expense ratio of 0.75% compared to the category average of 1.28%. American High-Income Municipal Bond A (MUTF: AMHIX ) invests a major portion of its assets that provide a federal income tax free return or that have a return subject to minimum alternative federal tax. AMHIX invests a minimum of half of its assets in debt instruments that are BBB+ or Baa1 or below. The American High-Income Municipal Bond A fund has returned 4.1% in the past one-year period. As of September 2015, AMHIX held 1,272 issues, with 1.49% of its assets invested in Tobacco Settlement Fing Corp N Asset 5%. American Funds Intermediate Bond Fund of America A (MUTF: AIBAX ) seeks current income with capital preservation. AIBAX invests in bonds, other debt securities and money market derivatives with a dollar-weighted average effective maturity between three and five years. AIBAX invests in securities that are rated not below A- or A3. AIBAX focuses on acquiring securities that are denominated in the U.S. dollar. The American Funds Intermediate Bond Fund of America A fund has returned 0.7% in the past one-year timef rame. Mark A. Brett is the one of fund managers of AIBAX since 2009. Original Post

Terraform Power: No More Blood On The Streets, Time To Take Profit

Summary I suggested a long position in Terraform Power on November 20th as panic made the valuation very compelling. Recent newsflow has been positive and generated a 50% rally in the stock since my article was published. It is time to reassess the investment thesis and decide whether to keep or sell the position. Less than a month ago I wrote an article on Terraform Power (NASDAQ: TERP ) titled ” Terraform Power : buying when there is blood on the streets?” At the time the stock was trading at $8.4 and it has been on a rollercoaster since then with a lot of news coming in. At the moment of writing this article the stock is at $12.40 and, including the 35c dividend, generated a 52% performance in less than a month. That was quicker than I expected. But such a big move deserves some additional analysis in order to understand if the time has come to close the position. Recent newsflow A few days after my article, the company announced some management changes . This was not good news as the clear message sent to investors was that objective number one was to save the overall Sunedison / Terraform Power / Terraform Global Group. They called it “organizational alignment”; the way I read it was: TERP is in much better shape than Sunedison (NYSE: SUNE ) and needs to provide some help. As expected the stock reacted negatively once the decision was digested and understood: some of the risk is switching back to Terraform from Sunedison as the Group is trying to go back to the initial yieldco drop down strategy, thus putting at risk TERP’s balance sheet. My own reaction was frustration as the investment thesis was certainly weakened by the news. Luckily a few days later (December 1st) reputable hedge fund investor David Tepper of Appaloosa disclosed a very large position in the company and sent a letter to management highlighting his concerns on corporate governance: “Thus, it is obvious that the deterioration in TERP’s security prices and credit profile this month results from (among other things): (1) the transmission of financial stress related to its “Sponsor’s” ambitious growth objectives and over-extended financial commitments; and (2) TERP’s incomplete and selective disclosures”. Market reaction was massive and Tepper’s involvement acted as a confidence booster. What particularly pleased the markets was that such a high profile hedge fund manager built a significant stake (9.5%) and took an activist role (something he rarely does) to push for a change and more protection for TERP shareholders. It really looked like the older brother trying to protect the younger one from bullies. The market appreciated and I recovered all my confidence in the stock and the investment thesis. The third important announcement was the revision of the Vivint acquisition . I am not sure how much weight Tepper’s letter had in the revision but that was clearly another positive. The change in the terms was not massive (the price was reduced 13% or $123 mln) while the reduction in the commitment on future purchases was more significant, with positive elements such as the downward price adjustment to achieve minimum returns. Overall I would say this was a positive but not “massively” positive. Stock reaction The following chart shows the stock performance since my previous article: TERP data by YCharts As you can see there has been a lot of volatility and a dramatic recovery during the month of December. This recovery was exclusively newsflow driven as many stocks in the energy yieldco space suffered significant losses during the same period of time (KMI comes to mind). Change to the investment thesis At the time of my previous post Terraform Power was extremely unloved and panic was pushing investors out. It was trading around book value pre minorities and had a yield of 16.8%. At the moment the stock is trading significantly above book value and on a yield of 11.3%. I believe there is still some value in the stock but it is not such a compelling story anymore. I believe upside from here in the short term is limited, especially if we consider that, while the stock went up 55%, credit markets deteriorated further in December, putting a lot of pressure and scrutiny on highly leveraged balance sheets. As a result I believe it is time to cash out and wait for better opportunities to arise.