Surviving Interest Rate Fears
The last few days have been tough for interest rate sensitive financial stocks, REITs and even utilities. All of these positions have added income and stability over the past year, as well as generally good performance. Now we seem to be in a new era. We have systematically examined all accounts to make sure that no one is overexposed to these sectors, moving into cash if necessary as we evaluate alternative investments for income-oriented investors. But overexposure does not mean no exposure. Financial stocks such as Washington Mutual, Wells Fargo, and NYB remain well managed, attractively priced companies with meaningful dividend yields. They are growing revenue sources beyond mortgages and have only become cheaper in recent weeks. Selected REITs are the same story. We have rode Rouse (RSE), a shopping mall REIT from a 52 week high to a middling price. But with consumers buying more than ever, RSE actually earns revenue from participation in tenants' sales. We think the market will re-price RSE higher when the current bedlam ebbs. We are also looking at other beaten down REITs in the healthcare sector.

Speaking of healthcare, today was a tough one for HCA, the hospital chain. It sunk on news of higher than expected bad accounts receivable leading to lower profits. However, as the economy improves and employment grows, the problem of uninsured unable to pay their hospital bills should abate. And HCA continues to generate a ton of cash, which should cause HCA to be re-valued higher in the months ahead as we make our way through uncertain times.

The good news looks to be media, of late, with Viacom and Comcast solidly performing. We continue to like this sector, which continues to be undervalued and is impervious to overseas competition.
- posted by Jay @ 5:15 PM