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Income Equity Stocks Continue to Outperform

Since its launch in January, the Blue Harbinger Income Equity strategy continues to outperform the S&P 500.  As the following chart shows, its holdings are well-diversified across market sectors. Further, the strategy’s dividend yield is well above the dividend yield of the benchmark S&P 500 index.  In this week’s Weekly, we review several holdings in particular, and describe why the strategy is positioned for continued outperformance.

The following chart again shows performance, only this time it includes ticker symbols instead of market sectors and categories.

US Bancorp (USB) is the strategy’s worst performing holding so far (it has declined 1.0% versus a gain of 1.7% for the benchmark S&P 500 index. USB is impacted significantly by interest rate expectations, and as the market has declined, so too have the chances of more interest rate increases.  This is bad for USB in the short-term, but in the long-term this stock has significant upside potential.

The only other holding in the strategy that has declined so far is our iShares International ETF (IXUS). This ETF provides non-US exposure to large, mid and small cap stocks in emerging and developed markets.  This is an important diversifier within the portfolio, and we except there will be times in the future where this holding significantly outperforms our other holdings.

The only other holding that is underperforming the benchmark S&P 500 index so far is our Russell 2000 Value ETF (IWN). It has gained only 1.1% so far. Because it is a small cap stock, it tends to be more volatile, but we expect it to deliver superior returns in the long run.  Also, because it is a “value” ETF there will be periods when it under-performs and outperforms the benchmark S&P 500. However, we expect IWN to outperform over the long-term, especially considering it has underperformed in recent years (ie. value stocks are due for a rally).


Lastly, an update on our Tsakos Energy Navigation (TNP) call options.  This position is up significantly since we purchased earlier this month as the stock has rallied roughly 17% off its recent lows.  We believe this one still has significantly more room to run before our call position expires in June 2016. Therefore, we continue to hold on to our position.  The strike price on our calls is $5.00, and you can read more about Tsakos here

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