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Portfolio Update

Third-Quarter Earnings Season Cometh

By Roger S. Conrad, on Oct. 23, 2014

Two weeks ago, we highlighted a scenario in which patient investors would have an opportunity to pick up high-quality, dividend-paying stocks at low price. (See Taking Advantage of the Market’s Irrational Fears.)

Since then, the mining and energy-related picks in our Lifelong Income Portfolio have pulled back significantly, raising two important questions:

  • Could the catalysts behind this selloff send these stocks even lower?
  • Have underlying fundamentals eroded their ability to generate superior returns over the long haul?

This recent selloff has nothing to do with rising interest rates, a risk factor that has been on many investors’ minds.

In fact, the yield on the 10-year Treasury note slipped as low as 1.868 percent this month, while investment-grade bonds continue to offer yields to maturity that are near generational lows.

Junk-rated debt, on the other hand, has come under selling pressure because of concerns about softness in the global economy.

For example, Northeast Investors Trust (NTHEX, 800-225-6704)—a mutual fund that specializes in high-yield debt—is still up on the year, but has given up about 3 percent of its value since raising its Aug. 20 payout.

Energy Weakness

Commodity producers have lost ground amid concerns about weakening demand in Europe and Asia at a time when supplies continue to grow.

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