Currently focuses on: Cohen & Steers Select Utility Fund (nyse: UTF)
Its
investment objective is to achieve a high level of after-tax total
return through investment in utility securities. In pursuing total
return, the Fund equally emphasizes both current incomes, consisting
primarily of tax-advantaged dividend income, and capital appreciation.
Under normal market conditions, the Fund will invest at least 80% of its
managed assets in a portfolio of common stocks, preferred stocks and
other equity securities issued by companies engaged in the utility
industry.
The Utility and Electrical industry is forecasted to grow at 8.5% for then next 5 years.*
Currently the Cohen & Steers Select Utility Fund is at a 16.89% discount
That means for every $100,000 invested in principle you invest roughly only $83,000.
Using
regression to the mean* theories believing that historical mean for US
based closed end funds historically trade at a 5% discount we would
forecast Cohen & Steers Select Utility Fund would increase in
principle about 12 percent assuming no change in the market value.
**
Regression to the mean is a technical term in probability and
statistics. It means that, left to themselves, things tend to return to
normal levels, whatever that is.
Cohen & Steers Select Utility Fund has a short but profitable history of growing principle
The current income from this fund is 6.14%
We
believe due to the fact you could buy 100,000 dollars of income
producing utilities that produce over 5% income or over $5,000 dollars
per year for around an investment of $83,000. Those how invest with the
much lower amount of $83,000 still has the same income of over $5,000
giving a much higher income of 6.14%
Performance:
"If
you're patient, buying funds at a steep discount can be extremely
lucrative? For example, suppose you divided the closed-end universe into
fifths, starting with the most expensive. The priciest 20 percent
gained 48 percent in the past five years. The 20 percent with the
steepest discounts, however, soared 160 percent." ***
To Reduce Risk
With
an effort to reduce the risks associated with closed ended funds at
deep discounts with high income we recommend diversification using many
different asset classes and fund families utilizing asset allocation
approach. In our growth and income model we use 7 different asset
classes to provide a balanced portfolio. This structure was designed to
minimize fluctuations. An event that might hurt one class of
investments might benefit another. Two examples of this is after the
9/11 terrorist attack and the 2000 stock market crash. In both cases
the stock market had a tremendous sell off, but the high grade bonds had
very large rallies. During those two events the stock market and high
grade bonds had no correlation. Many experts believe diversifying
between non-correlated asset classes is the single best way to reduce
volatility risk.
When building portfolio's we use a selection criteria that
focus on: unique asset classes, deep discount , high yield, consistency
of payments, ongoing fee's and other factors we incorporate into the
selection are, past track record of the fund, and past track record of
the management team, and of course the management team. We apply our
selection criteria to over 600 closed ended funds with a goal to find
only 1 or 2 in each asset class that fits our needs.
Simply don't put all your eggs in one basket. If the assets classes are non-correlated this reduces the portfolio risk.
To summarize Cohen & Steers Select Utility Fund:
1) A conservative industry
2) Diversifies investments inside the utility industry
3) An industry forecasted to grow at 8.5%
4) Investing at a 16.89% discount
5) Receiving a 6.14% current income
6) Regression to the mean would indicate principle growth of about 12% with no market change.
We
forecast Cohen & Steers Select Utility Fund to achieve industry
growth rates plus regress to a more historic means these two combined
events would indicate a total return of 10.9% percent per year over the
next 3 to 5 years.
Randy Durig manages several Portfolios'
including the Growth & Income Portfolio to see the full list go to
www.durig.com or www.money-manager.us
Randy Durig owns Cohen
& Steers Select Utility Fund in his discretionary client's
portfolios and in his personal account. Past performance is not a
guarantee for future returns. All information we believe to be correct
but make no guarantee to accuracy.
Durig's Monopoly Blue Chip
Portfolio National Performance Rankings: 3rd In the United States,
Ranked by 3 year annual return, for Large Capitalization Blend, 4th
Quarter 2005, By Money Manager Review.
Durig Capital is a
registered investment advisor. If you know someone that would like to
receive our research call toll free 877-359-5319.
For those
looking for articles on closed and mutual funds Randy recommends
www.investment-investment.us there are about 75 articles focused on
mutual funds and Exchange trade funds.
*Zacks Utility industry forecast
** Source http://www.visi.com
***Source USA Today newspaper
