Kashkari: We Found Safe-Haven Stocks
Treasurysand goldare not the only "safe havens" out there for investors. In the midst of market chaos, dividend-yielding equities are a safe haven all their own, says Neel Kashkari, Pimco's head of global equities.
"For long-term investors, equity markets are attractively priced today. Developed- and emerging-market equities with [price to equity ratios] of 12 or 13 times offer attractive dividend yields," says Kashkari.
He stresses, however, that he's not talking about short-term investing. In the short term, equities are dominated by macro catalysts.
"Nobody can predict, is tomorrow risk-on or risk-off, just based on what policy rumors are coming out of Europe," he says.
Indeed, Kashkari's comments come on a day when all 10 S&P sectors are down, as investors doubt the pact for greater fiscal union among European Union economies can resolve Europe's economic crisis.
So, where are these attractive, less-volatile dividends? This Pimco strategist says they are typically large, well-capitalized companies exporting to emerging markets.
"Take one of our top holdings in our emerging market strategy, Hon Hai , the big contract manufacturer in China. Twenty-five percent of their revenue is coming from Apple — so they're part of the big export machine back to the US."
This strategy, however, has its borders. Pimco's portfolio for example, avoids exporters who count on Western Europe right now.
"How much of their export machine is going to Europe, and where in Europe is it going to? That's obviously a big risk," conceded Kashkari.
So Pimco went elsewhere.
"Sparebank is one of the biggest depository companies in Russia. We also think that that's an attractive buy."
Naysayers raise concerns about the dwindling growth prospects of emerging markets.
Kashkari does not disagree, but remains bullish on this strategy as the worst-case scenario — capital markets freezing up, and economies failing — is less likely now.
"The best thing that's come out of all of the regulatory reforms so far is increasing the capital requirements of banks," he said. "That's the buffer against the unknown, against all the things that can go wrong."
Additional News: Taiwan Stocks Rise, Hon Hai Gains
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Mr. Kashkari does not personally hold securities of the aforementioned companies.