Currently focuses on: Cohen & Steers Select Utility Fund (nyse: UTF)
Its investment objective is to achieve a higher 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 earnings, and capital appreciation. Below normal industry 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.
Making use of 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 marketplace worth.
** Regression to the mean can be a technical term in probability and statistics. It means that, left to themselves, things tend to return to normal levels, whatever which is.
Cohen & Steers Select Utility Fund includes a short but profitable history of developing principle
The current income from this fund is 6.14%
We believe as a result of the fact you could buy 100,000 dollars of income producing utilities that produce over 5% earnings or above $5,000 dollars per 12 months for around an investment of $83,000. Those how invest with the much lower amount of $83,000 still has the same income of more than $5,000 giving a much higher earnings of 6.14%
Performance:
“If you’re patient, buying funds at a steep discount can be extremely lucrative? For instance, 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 Decrease Risk
With an effort to reduce the risks associated with closed ended funds at deep discounts with higher earnings we recommend diversification making use of many different asset classes and fund families utilizing asset allocation approach. In our development and earnings model we use 7 different asset classes to provide a balanced portfolio. This structure was created to minimize fluctuations. An event that may well hurt one class of investments might benefit one more. Two examples of this is following the 9/11 terrorist attack as well as the 2000 stock marketplace crash. In both cases the stock market had a tremendous sell off, but the higher grade bonds had very large rallies. During those two events the stock industry and high grade bonds had no correlation. Many experts believe diversifying between non-correlated asset classes is the single best solution to lessen volatility risk.
When building portfolio’s we use a selection criteria that focus on: unique asset classes, deep discount , higher yield, consistency of payments, ongoing fee’s and other factors we incorporate into the selection are, past track record with the fund, and past track record from the management team, and of course the management team. We apply our selection criteria to over 600 closed ended funds having a goal to find only 1 or 2 in each asset class that fits our needs.
Simply don’t put all your eggs in 1 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 earnings
6) Regression to the mean would indicate principle development of about 12% with no market change.
We forecast Cohen & Steers Select Utility Fund to achieve industry development rates plus regress to a more historic means these two combined events would indicate a total return of 10.9% percent per year more than the next 3 to 5 years.
Randy Durig manages several Portfolios’ including the Development & 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 12 months annual return, for Large Capitalization Blend, 4th Quarter 2005, By Cash Manager Review.
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