thinking it through

2020 Isn’t 2018The fall of 2018 saw a drop in the

S&P 500 by 19.8% from September 20 through Christmas Eve. And with the slip from the recent high in the index, there are some that are wary of the market here. But things are much different now.

The market back then was coming off of the massive economic benefits from the Tax Cuts & Jobs Act of 2017 (TCJA). Revenues were up in US corporations and, aided by corporate tax reforms, bottom-line earnings were up through 2018.

The argument in late 2018 was that the reform benefits might have run their course. In turn, the valuations of company stocks were more likely to drop than rise. But sales for the companies inside the S&P 500 kept advancing through the end of 2018, further into 2019 and even into pre-COVID 2020.

In addition, the Federal Reserve Open Market Committee (FOMC) quickly recognized its mistakes in monetary policy and pursued policy changes to drive liquidity for the economy and markets.

Smart investors began to recognize that the economy and the companies underneath the S&P 500 were going to thrive, and the buying returned. The result was that the S&P returned 36.5% from Christmas Eve 2018 through year-end 2019. The Bloomberg Barclays US Aggregate Bond Index neared double-digit returns during that time period as well.

Now, this is not to say that the COVID-19 fallout is done or that the elections won’t bring upheavals. But if we stay with a balanced mix of stocks and bonds, we will likely thrive. We’ll discuss all the specific opportunities and more in this issue.

October 2020

Vol. 31, No. 10

Thinking It ThroughDear Friend,

The S&P 500 is down sharply from its September 2 high of 3,580.84, worrying many traders who are now wondering whether that was as good as it gets. But even with some of the recent selling, the S&P 500 has gained 2.8% in price and 4.2% in total return on a year-to-date basis. And for the trailing year, it’s gained 10.4% and returned 12.5%, which isn’t too shabby given COVID-19.

That performance includes the massive plunge in February through March 23 and one of the most dramatic turnarounds in stock market history. And it also includes a massive turnaround in the underlying US economy.

Weekly jobless claims have dropped by 87.5% from the last week of March to date. Continuing claims have plunged by 49.3% from early May to date. And with surging job creation, or resurrection, the unemployment rate has gone from 14.7% to a current 8.4%. Expectations by the Federal Reserve are for that number to end up near 7.8% or better by year-end.

This strong job recovery is bolstering the Bloomberg Consumer Comfort Index, which continues to climb back from May to date at a current 47.7, better than where it was in 2016. The result is a return of consumer spending, with retail sales continuing to advance strongly.

In addition, housing markets are strong for both existing and new construction, as are forward-looking data for building permits and mortgage applications. The car market also is surging due to pent-up demand.

So, many companies should be seeing further gains in revenue and profits, which help bolster the stock market. But at the same time, with the S&P 500 weighted more towards technology now, the valuation of that sector is very pricey. Meanwhile, the broader measure of stocks in the unweighted S&P 500 is less frothy and represents a lot more value.

In this issue, we’ll go through some of the best value opportunities hiding in plain sight and examine what will keep working both into and through the November 3 elections.

Growth StrategiesChallenges & Opportunities

US stocks and bonds have been strongly recovering and performing since March, largely thanks to the Herculean efforts and accomplishments of the Federal Reserve. The Fed’s official balance sheet of assets has ballooned to over $7 trillion, which is more than twice the size of where it stood from late 2009 to 2013 at $2-$3 trillion in response to the financial crisis of 2007 to 2008.

The Fed’s buying of nearly every sort of credit asset as well as further lending facilities and even funds and ETFs was a major source of support for the recovery in the US economy and the US stock market. Ultra-low interest rates and bond yields are benefitting corporations and allowing them to refinance debts in both private placements and bond issues. In turn, this is adding bottom line earnings.

All of the Fed actions have provided not just a surge in bond-buying, but a backstop for bond investors. The central bank will continue to hold its portfolio of credit assets for years to come, much like it did from 2009 into 2018.

And it will continue to step up as it sees fit to buy any sort of asset to keep yields low and liquidity high. And of course, this comes with the guidance of BlackRock

(continued)

2 Profitable Investing | October 2020 | profitableinvesting.investorplace.com

Neil George’s Profitable Investing® (ISSN 2577-9311) is published monthly by InvestorPlace Media, LLC, 1125 N Charles St, Baltimore, MD, 21201. Please write or call if you have any questions. Phone: 800/211-8566. Email: [email protected]. Web site: profitableinvesting.investorplace.com

Editor: Neil George Chief Executive Officer: Brian Hunt Senior Managing Editor: David Tony Marketing Director: Katy Anadale Managing Editor: Gregg Early Chief Marketing Officer: Brad Hoppmann Managing Editor: Wola Odeniran Marketing Director: Mary Southard Editorial Director: Luis Hernandez Senior Designer: Marc Gagarin

Subscriptions: $249 per year. © 2019 by InvestorPlace Media, LLC, Founding Member of the Newsletter Publishers Association of America. Photocopying, reproduction or quotation strictly prohibited without the written permission of the publisher. While the information provided is based upon sources believed to be reliable, its accuracy cannot be guaranteed, nor can the pub-lication be considered liable for the investment performance of any securities or strategies mentioned. Subscribers should review the full disclaimer and securities holdings disclosure policy at https://profitableinvesting.investorplace.com/disclaimers-and-disclosures or call 800/219-8592 for a mailed copy. Periodicals postage rates paid at Baltimore, MD, and at additional mailing offices. Postmaster: Send address changes to Neil George’s Profitable Investing®, InvestorPlace Media, LLC, 1125 N Charles St, Baltimore, MD, 21201.

(BLK) in the Incredible Dividend Machine, which remains under contract to aid with the bond-buying and investing programs of the Fed.

The result is that just like US stocks, US bonds have performed very well. On a trailing-year basis, the overall US bond market, as tracked by the Bloomberg Barclays US Aggregate Bond Index, has returned a remarkable 7.9%. And on a year-to-date basis, the index has returned 6.9%. US corporate bonds have done even better with the trailing year returning 9.6% while US municipal bonds have returned a tax-advantaged 4.6%.

ChallengesThis is a year that everyone wants to

forget and get past. But we’re not there yet. The recent shake-up in the S&P 500 Index is proof of that. And right now, it’s worth taking a look at what could go wrong.

The weightings of the S&P 500 have increasingly become both an advantage and a curse for the index. Technology companies now make up 27.3% of the index. That’s up significantly in recent years. This means that the market’s appetite for technology companies, both newer and longer-standing public companies, has pulled in massive amounts of cash.

S&P cuts up the overall 500 Index into sector indexes, with the Information Technology Index returning a whopping 39.7% over the trailing year. And that includes the drop in September of 12.1%. One of the challenges is the fundamental valuation of the average underlying companies in the tech sector.

Tech stocks in the index have been bid up, resulting in an average price to earnings ratio at a whopping 31.2 times, a price to book value of a big 9.2 times and a price to sales running just under 6 times. These ratios are a challenge in that they are pricing in expectations of surges in earnings and sales as well as

rising intrinsic value in the underlying companies. And with average sales for the technology sector only gaining 5% for the second quarter and earnings only gaining 3.1% for the same period, the market is pricing in a whole lot more in coming quarters.

And in the compiled estimates by Bloomberg, both sales and earnings for the technology sector of the S&P should drop in the fourth quarter. That said, while there is still a lot to guess into 2021, for now the compiled estimates for the opening quarters show reversals for gains in both average sales and earnings approaching 7%-8% for sales and 11%-13% for earnings gains.

As traders and investors take those guesses at face value, it may continue to work for both the technology sector index and its heavy weight on the general S&P 500. But any sort of concerns for the coming quarters into 2021 would have a dire impact on expectations and therefore the valuations for the underlying companies. Because right now, technology is priced for lots of further gains and successful sales and earnings.

For now, I am keeping the indexed technology funds throughout the model

portfolios as well as several individual technology companies. But I’m also continuing to draw your attention to the value segments of the stock market, which are providing safer opportunities for growth and income as well as defense against near-term selloffs in technology and the resulting impact to the S&P 500.

Unweighted S&P 500 IndexThere is another way to look at the

S&P 500 Index that provides a better perspective on what is happening for the bulk of the stocks in the index that aren’t tech-focused. The unweighted S&P 500 Index takes all of the 505 stocks and treats them as equals in both the price movement, dividends and the underlying valuation metrics.

The unweighted index, using the Bloomberg symbol of SPW, has only gained 0.4% in price and 2.6% in return over the trailing year, underperforming the weighted regular S&P 500 (SPX).

But this trailing price and return performance comes with some major advantages when it comes to valuations. The unweighted index is valued at a much more reasonable price to earnings ratio of 23.6 times. On a

120

110

100

90

80

70

SepJunMarDecSep2019 2020

110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44

— Price Earnings Ratio 23.55— Price to Book Ratio 2.45— Price to Sales Ratio 1.44

20202019SepJunMarDecSep

Normalized As Of 09/20/2019 Last Price— SPW Index 101.08— SPX Index 110.94

34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20

2019Oct Nov JanDec MarFeb MayApr Jun Jul SepAug

2020

— S&P 500 ESG Index (USD)— S&P 500 Index

300

280

260

220

240

200

180

Last Price 272.85High on 09/15/20 295.70Average 248.86Low on 03/23/20 181.66 272.85

2019 2020SepJunDec MarSep

10

-10

-15

5

0

-5

Jun Jul SepAugMarFebJan MayAprNovOct Dec2019 2020

30

35

40

45

25

20

15

2019 2020

Last Price 38.47High on 09/01/20 42.99Average 31.20Low on 03/18/20 16.47

38.47

SepJunDec MarSep

20

30

10

0

-20

-10

SepJunDec Mar20192018 2020MarDecSep SepJun

— Vanguard ESG US Stock ETF— S&P 500 Index

— iShares ESG Aware USD Corporate Bond ETF— Bloomberg Barclays US Agg Total Return Value Unhedged USD

3.20

2.80

3.00

2.60

2.00

2.20

2.40

1.80— Price to Book Ratio 2.38— Weighted Book Value 111.97

201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

S&P Information Technology Index Price to Earnings, Price to Book & Price to Sales

Source: Bloomberg Finance, L.P.

Profitable Investing | October 2020 | profitableinvesting.investorplace.com 3

price to intrinsic (book) basis, it is only at 2.5 times. And on a price to sales, it is at a significantly discounted value of only 1.4 times.

This means that there should be less downside for the broader index, which is more reflective of a lot of value companies, including utilities, real estate, consumer goods and healthcare. In addition, the forecasts are for much stronger gains in sales in the 13% range with earnings gains approaching 22% into 2021.

This means that not only are investors with a broader portfolio beyond technology getting better values by buying broader defensive stocks, but they may well be rewarded with stronger potential gains in sales and earnings into 2021 than the technology sector.

If Elected…Now I want to turn to the elections

on November 3, even as many around

the nation have already voted or shall do so ahead of that fateful Tuesday. The House, Senate and the White House are all in play in the general elections, and the results could be as important for the economy and markets as the results of the 2016 general elections.

I have always watched elections and, more importantly, legislative and executive activities when it comes to the markets and individual stocks and bonds. The government is the single-largest component of the US economy, as measured by spending as a percentage of gross domestic product (GDP), and the hand of government can either be a major help or hindrance.

Single-party control of the House, Senate and White House can be either a major help, or nothing but trouble. This is the uncertainty risk in the market, as single-party control means that legislation will happen in 2021-2022. Republican sole control is not likely by

my reading, but Democrat control could mean a variety of legislation.

Tax code changes will be front and center. This starts with a big increase in corporate tax rates. Recall that the Tax Cuts & Jobs Act of 2017 (TCJA) was a big boost to earnings of US corporations, which set off the run-up in the S&P 500. The potential increase in rates from 21% to 28% as discussed on the campaign trail will hit earnings. In turn, the compiled positive expectations discussed earlier will be reversed and both the tech-weighted S&P 500 and the unweighted index will be impacted negatively.

In addition, with a major percentage of the US workforce working under passthrough entities, reversals of tax provisions of the TCJA would also be expected. This would provide challenges to professionals, tradesmen and contractors in the economy. Of course, it will take time to get these things done, so the impacts may well be delayed.

Healthcare rules and regulations will be another legislative target. Despite the Supreme Court decisions limiting parts of the Patient Protection & Affordable Care Act of 2010 (ACA), I would expect legislation to expand Medicaid as well as further mandates on insurance. We are already ahead of this with Centene (CNC) in the Niche Investments, which is a leading provider inside the ACA as well as the go-to contractor for Medicaid, Medicare and government-provided healthcare and insurance.

Mandates for green energy and restrictions on fossil fuels will negatively impact the petrol patch, which we’ve gotten out of with the exception of Viper Energy (VNOM) as well as natural gas pipes, including Kinder Morgan (KMI) and Enterprise Products Partners (EPD). But natural gas is vital for current and expanding green energy, as the recent experience of California proves out. At the same time, environmental, social & governance (ESG) stocks in the green energy space will be in the catbird seat. Read more on this in the next section.

Another possible scenario is that the House stays in current control, the Senate stays in current control and the White House changes. This would mitigate legislative change risk.

120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

Unweighted (SPW) & Weighted (SPX) S&P 500 Indexes Normalized


120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

Unweighted S&P Index Price to Earnings, Price to Book & Price to Sales



And the Senate would slow down lots of White House initiatives and appointments. For many in the markets, this scenario has a lot of appeal, as it would provide for a locked government.

But agency interpretation and enforcement of regulations and initiatives would be a challenge for many industries. Fossil fuels would suffer, while ESG would benefit. Financials that are regulated would be in the gunsights. But again, we got out of banks a long time ago. And I have expanded the alt-financials that are outside of the purview of the Treasury and Federal Reserve. Sixth Street Specialty Lending (TSLX) and Main Street Financial (MAIN) would benefit.

If the House and Senate stay the same and the White House stays, then we have status quo. Recovery in the economy, tax code and projected earnings cases stay intact. But if the House stays, the Senate flips and the White House stays, look for no legislation and a constant barrage of attacks lobbed at the White House.

The bottom line is that the US is a resilient nation and economy. Changes come, and we deal with them. Right now, the model portfolios are pretty well placed for the various scenarios coming out of November 3. That said, one of the big risks in the near term is that election results will take time given so much remote voting. Contested results, with both parties already heavily lawyered up, and street protests are real possibilities. This will not be well received in the stock market.

The antidote is already inside the model portfolios. Gold via Franco-Nevada (FNV) is doing well going into the elections. And bonds remain the other major haven both in the near term as well as into 2021 regardless of the election outcomes.

Proven Growth & Income

I know that many of you are getting onboard with ESG investing. And I also know that some of you might think that it’s bunk. But for me, it’s not about a political view. It’s about what is working in the stock and bond markets.

I’ve read, listened to and had the tremendous privilege of meeting Dr. Milton Friedman, the Nobel Prize winning economist from the University of Chicago. He was an ardent supporter of the free market. And while ESG was not yet a common investment phrase, he was critical of companies that took efforts towards causes other than shareholders’ returns. He thought that by doing this, it made companies less productive and profitable and restricted economic growth. But even Uncle Milty would agree that market forces are justifying investment in ESG today.

ESG stands for environmental, social and governance. It’s both a category of companies as well as a scoring mechanism of companies. But fundamentally, ESG is a means of investing that will not only provide growth and income but with a better impact on the environment, a greater positive contribution to society and more transparent management that is focused on shareholders as well as other stakeholders.

ESG Rises in Demand & Performance

Individual investors are still a smaller part of the stock and bond market in their direct investments. Institutional investors continue to dominate. And while many institutions are run privately for the benefit of their founders, others are run for the benefit of many different cohorts. Think pension funds or endowments, which make up a large portion of the capital market in the US and beyond.

The beneficiaries of these funds are demanding that fund management invest more in ESG-compliant or ESG-focused companies. And historically, beneficiaries have had a large sway on fund management when it comes to targeted issues or agendas.

BlackRock (BLK), inside the Incredible Dividend Machine, has been making larger ESG-focused investments. Larry Fink, the founder and CEO of the company, is a big proponent of ESG and has led the asset management company to roll out a series of funds, including a major initiative in its dominating ETF product line up.

The S&P ESG Index has returned 202.1% over the trailing 10 years for an average annual equivalent return of 11.7%. And over the trailing year, the ESG index has outperformed the S&P 500 by 18.8%. This shows that ESG can be more defensive or reliable and may well attract more capital for better returns than the general stock market going forward.

Now, ESG compliance is a squiggly bit of analysis. On my Bloomberg terminal, there’s a function that takes a lot of compiled data and comes up with all sorts of embedded ESG criteria utilizing artificial intelligence and other calculations.

So, compliance can be achieved across industries at some level for environmental, social or governance. But I want to direct your attention to three companies firmly leading in the ESG green energy space and then make my recommendations for new two ETFs

120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

NextEra Energy Stock Price



in the general ESG stock and bond markets that are all great opportunities right now.

Environmental Growth & Income

Renewable energy is a significant part of the business for ESG-friendly utilities. Government incentives led many utilities to enter and expand in renewable energy. And state and local governments have been mandating increasing use of renewable energy as a percentage of power generation.

This has led the poster child of the ESG utility market, NextEra Energy (NEE) in the Total Return Portfolio, to really perform. NextEra is one of the largest wind and solar power companies in the world. It operates in its regulated market in Florida (utility FPL) and has expanded around the nation and beyond in its unregulated business.

The stock has generated a 610.1% return since it was added to the Total Return Portfolio. For the trailing year, it has returned 23.5%, which is well above the S&P 500’s return. Yielding 2.1%, NEE remains an ESG buy under $285.50, ideally for a tax-free account.

Following the playbook of NextEra is Xcel Energy (XEL) in the Incredible Dividend Machine. It is deploying renewable energy generation in its regulated markets and ever more for its national unregulated business that serves nearly four million customers.

Over the past five years, it has generated a return for shareholders of 125.1%, which is 51.6% better than the return of the S&P 500. Yielding 2.6% with its recently affirmed dividend, XEL is another ESG buy under $72.50, ideally for a tax-free account.

But perhaps one of the best ESG opportunities right now is Hannon Armstrong Sustainable Infrastructure Capital (HASI) in the Total Return Portfolio. Hannon Armstrong provides financing for renewable energy and related projects.

It’s set up as a REIT, and the structure helps it avoid corporate income tax, which means more cash for dividends. And thanks to the Tax Cuts & Jobs Act of 2017 (TCJA), the dividends come with a 20% deduction at tax time, which this year is coming in October.

But what makes the company even better isn’t just the renewable energy projects or the tax reductions or the dividend income. It’s that its financed projects come with government guarantees. This provides a backstop for the company and shareholders, which in the current economy is very attractive.

Since it was added to the portfolio at year-end 2019, it has returned 23%. And since the general stock market low in March to date, the shares have returned 115.3%. With more ESG-seeking investors, I see this company gaining more notice. It’s still a bargain at a mere 2.4 times its intrinsic book value, which is cheap for a REIT and more so for a government-guarantee wielding financial. Yielding 3.5%, HASI remains a buy under $44.75, ideally for a taxable account.

Packaged to Perform in Stock and Bond Markets

Now, if you want to dip your toe into the cleaner waters of ESG investing, one of the easiest ways is by using an exchange-traded fund (ETF). On the stock front, I’m recommending the Vanguard ESG US Stock ETF (ESGV). It synthetically tracks the FTSE US All Cap Total Return Index, which has a heavy weighting in technology along with healthcare and financials.

Since coming to the market in September 2018, it has returned 21.2%, which is well ahead of the general S&P 500 for the same time period. Yielding 1.3%, ESGV is a buy under $65.00 in the Indexed Equities section of the Total Return Portfolio, ideally for a tax-free account.

120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

Hannon Armstrong Sustainable Infrastructure Capital Stock Price


120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

Vanguard ESG US Stock ETF & S&P 500 Index Total Return



In ESG bonds, now more commonly referred to as “green bonds,” the market is really heating up on the institutional side. Issuers are moving quickly to meet that demand with new green bonds.

Green bonds are used to fund ESG initiatives to meet the criteria for buyers and investors. And they come from governments to corporations. There is now a series of ETFs that is working with Bloomberg Barclays bond indexes, particularly with US corporates, that have high ESG ratings.

BlackRock is a big leader in ESG investing. And its iShares ETF unit (acquired some years ago from Barclays) has the top synthetic investments in the US ESG Corporate market with its iShares ESG Aware USD Corporate Bond ETF (SUSC).

Since coming to the market in late 2017, the ETF has generated impressive yield and a solid 20.8% return. For the trailing year, the ETF has returned 9%, which tops the general US Aggregate Bond Index.

Yielding 2%, SUSC is a buy under $28.50 in the Multisector Bonds section of the Total Return Portfolio, ideally for a tax-free account.

More Proven Growth & IncomeValues with Lots of Reliable Dividends

Both real estate investment trusts (REITs) and utilities have tangible real and hard assets that are difficult or impossible to replicate specifically. Land is land, and they aren’t making any more of it. And major power plants and transmission equipment can’t just be replicated in local and regional markets.

Yet, the stock market has both of these sectors on the cheap this year. The underlying weighted average book value of all of the REITs inside the Bloomberg US REIT Index is up by more than 10% over the past five years. But the stock market has the average price to intrinsic (book) value at a mere 2.39 times. That’s down significantly from just earlier this year.

Now of course, just like the underlying real estate, there are lots of

REITs in the wrong properties during the COVID-19 pandemic. Hospitality and retail are no-go places.

Meanwhile, we’re in some very profitable and must-have properties, as evidenced in just the Total Return Portfolio alone. Alexandria Real Estate Equities (ARE) owns labs that are mission-critical right now. Digital Realty Trust (DLR) has the data centers that were in demand before lockdowns and now for cloud demand that has only gotten stronger.

Hannon Armstrong (HASI) is discussed earlier as a leader in ESG finance. Life Storage (LSI) has the heads-you-win-tails-you-win properties in self-storage. In good times, people buy more stuff. In bad times, they have to move and store that stuff.

Medical Properties Trust (MPW) owns all of the medical services

properties with tenants paying up and staying paid-up in their leases. And in logistics, warehouses are in evermore demand with more remote shopping and supply lines aiding Prologis (PLD).

W.P. Carey (WPC), even with parts of its portfolio in commercial properties, has arguably the biggest and most diversified portfolios, including government properties. And it has the proven history of boosting shareholder payouts quarter after quarter for decades.

Each of these companies makes for a bargain buy right now, and they come with dividend yields well above stingy tech companies as well as the general market average as tracked by the S&P 500 Index.

But the broad index investment to start with is in the Vanguard Real Estate ETF (VNQ). Since coming to

(continued on p. 8)

120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

iShares ESG Aware US Corporate ETF and US Aggregate Total Return


120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

S&P 500 ESG Index & S&P 500 Index Total Return



At least 10% below buy-below price as of the publication of this issue T: Buy in taxable account for best results TF: Buy in tax-advantaged account (IRA, etc.) for best results*Taxable-equivalent yield Bold indicates revised price

Stocks (56%)Indexed Equities (18%) Symbol T/TF

Entry Date

Fwd. Yield

Buy Under Comments

Vanguard ESG US Stock ETF ESGV TF 1.30% $65.00 The indexed way to build an attractive ESG-compliant portfolio

Vanguard Healthcare ETF VHT TF 3/16/16 1.24% $208.50 Healthcare companies are on the frontline for economic recovery prospects

Vanguard High Dividend ETF VYM TF 6/21/16 4.06% $85.00 Core S&P 500 investment more inline with unweighted S&P with dividend focus

Vanguard Info Tech ETF VGT TF 8/20/18 0.95% $318.25 Technology pullback providing an opportunity to buy in at better value right now

Vanguard Real Estate ETF VNQ TF 10/28/19 3.79% $82.75 US REIT sector is cheap while underlying assets are gaining value makes for bargain buys

Vanguard Utilities ETF VPU TF 9/24/18 2.81% $133.25 US utilities are gaining underlying intrinsic value while the stock market keeps them on the cheap

Growth & Income Plays (24%)Alliance Bernstein AB T 11/19/18 8.79% $29.25 This asset management company keeps generating fees for shareholders including strong dividend

Amazon.com AMZN TF 4/22/20 0.00% $3,513.30 Cloud computing, streaming content, best online retail platform is everything for the modern economy

Compass Diversified Holdings CODI T 5/21/18 8.14% $19.00 This is a smaller Berkshire Hathaway with lots of cash and cashflows

Ericsson ERIC T 12/11/18 0.67% $12.50 The 5G equipment company with mission-critical equipment gaining with Huawei restrictions

FMC Corporation FMC TF 4/25/19 1.59% $112.50 This century-old company is a leader for crop protection and farm-yield enhancement and is getting noticed

Franco-Nevada FNV T 6/26/19 0.73% $151.75 The way to own gold with income; use the near-term bounce in the US dollar to buy cheaper

Hercules Capital HTGC T 6/25/18 11.13% $12.25 High dividend-paying company with impressive tech portfolio participation including those in pre-IPO companies

Hormel HRL TF 4/17/17 1.91% $53.50 Input meat costs dropping, aiding margins for its packaged food products

Microsoft MSFT TF 11/30/12 1.02% $230.75 The go-to company for cloud computing, operating systems and must-have software + rising gaming revenues

Nestle NSRGY T 12/17/08 2.33% $124.20 Company is feeding households and pets along with livestock at ever rising levels

NextEra Energy NEE TF 9/8/08 2.02% $285.50 ESG top mark company with its mega collection of wind and solar energy

Procter & Gamble PG TF 12/17/08 2.30% $139.45 Leading consumer and household goods company that continues to deliver for shareholders

Viper Energy VNOM TF 7/23/18 1.50% $12.00 The landlord of the Permian basin keeps getting paid on leases and less at risk of petrol price volatility

Waste Management WM TF 10/30/18 1.89% $117.00 Expanding energy from waste (EFW) makes for great ESG stock and keeps the trash picked up

Zoetis Incorporated ZTS TF 5/28/19 0.50% $163.75 Global leader in pet and livestock vaccines + ongoing wave of bigger pet care spending

Real Estate Investment Trusts (8%)Alexandria Real Estate Equities ARE T 7/29/20 2.66% $177.60 Leading owner of laboratories for drug and vaccine developers

Digital Realty Trust DLR T 2/9/18 3.09% $157.25 Continued surge in demand for cloud computing and data centers propels company

Hannon Armstrong HASI T 12/31/19 3.47% $44.75 This ESG renewable energy finance REIT with govt. support is getting more and more attention

Life Storage LSI T 12/26/18 3.99% $108.25 Self-storage & localized warehousing like Amazon works well for new economy

Medical Properties Trust MPW T 2/26/19 6.35% $21.25 Healthcare remains stronger in demand; company has prime tenants paying rent

Prologis PLD T 7/29/20 2.33% $104.90 The leader in US and major market warehouses and logistics support continues to build portfolio

W.P. Carey Inc. WPC T 1/3/14 6.28% $69.00 Rent collection remains robust and dividends keep getting hiked; still has some commerical property risk

Toll Takers (6%)Enterprise Products Partners EPD T 2/22/05 10.72% $20.50 Even with ESG, US still needs natural gas; this is the proven midstream company with rising dividend

Kinder Morgan Inc. KMI TF 11/28/14 8.03% $17.25 Complementary to ESG clean energy, as gas is the backup plan + proven history of success with promised dividend hikes

Fixed Income (44%)Cash (11%)Synchrony Bank high-yield savings account 7/31/15 0.75% Market 0.75% yield—call 866/226-5638 to order; watch FDIC limits; yield remains above Treasuries with safety

Multisector Bonds (15%)BlackRock Credit Allocation Trust BTZ TF 7/26/19 7.20% $14.00 Corporate bonds gaining in price & delivering income; BlackRock is Fed's contracted buyer

DoubleLine Total Return Bond Fund DLTNX TF 7/22/14 3.08% $10.95 Non-leveraged open-end fund with government-guaranteed mortgages continues to work

iShares ESG Aware USD Corp. Bond ETF SUSC TF 1.97% $28.50 ESG green bonds make up the synthetic holdings of this newer ETF

Vanguard Interm.-Term Corp. Bond ETF VCIT TF 10/28/19 2.45% $97.25 Corporate bonds continue to outperform general US bond market with Fed backstop

Preferred Shares (7%)Atlas Corp. 7.875% Series H ATCO.PH TF 1/22/19 8.51% $24.50 CUSIP# 81254U304

Teekay LNG Partners 9.00% Series A TGP.PA TF 1/22/19 9.10% $25.00 ISIN# MHY8564M1131

iShares US Preferred Stock ETF PFF TF 3/9/17 5.28% $37.10 Preferred stocks continue to work for growth & safer income

Flaherty & Crumrine Preferred Opp. Fund PFO TF 7/23/18 6.64% $11.55 Preferred stocks delivering growth & yield; watch buy under price

Minibonds (3%)JMP Group 7.25% 11/15/27 JMPNL TF 1/22/19 7.97% $23.50 CUSIP# 466273109

Cowen Inc. 7.75% 06/15/33 COWNL TF 1/22/19 7.12% $27.00 CUSIP# 223622804

US Cellular 6.95% 05/15/60 UZA TF 1/22/19 6.87% $25.00 CUSIP# 911684405

Municipal Bonds (4%)BlackRock Taxable Muni Bond BBN TF 2/26/20 5.22% $25.24 Taxable muni bonds better value than US Treauries boosting demand; fund works for IRAs

BlackRock Municipal Income BLE T 4/23/18 7.39%* $14.89 BlackRock is a top muni manager in attractive market right now

Nuveen AMT-Free Credit NVG T 4/23/18 7.82%* $16.00 Munis should be bought now; fund at discount to NAV with AMT-free income

Nuveen Municipal Credit NZF T 4/23/18 7.86%* $15.60 Munis are great buys right now and fund is at discount to NAV

Treasury Bonds (4%)Two-year Treasury Bond T 12/24/18 0.13% Hold Hold if you own at a higher yield, but do not buy more

TOTAL RETURN PORTFOLIO


the market, it has posted a total return of 216.7% for an annual equivalent return of 7.5%. With a dividend yield of 3.9%, it provides lots of income, which means it pays you to be patient during challenging market and economic conditions.

Valued EssentialsNot one bit or bite of Silicon

Valley wizardry will move, light up or generate a patent royalty without the essential services companies, principally power utilities. And it’s the essential services that are there during economic boom or bust times, keeping the lights on, the gas flowing and the water delivered and taken away.

All of these companies are very asset-intensive. So it is interesting to look at the underlying intrinsic value of all of those assets, as measured and tracked by S&P and its Utilities Index. The weighted average intrinsic value of the stocks in that index, including all of the must-have assets, is up significantly over the past five years. And over the trailing year, they’ve gained some 4.3%.

Yet, the utility market’s price to intrinsic value is a fraction of the general S&P and more so for the technology sector stock average. Over the past year, that value is down by some 13.4%, making for a very good value buy right now.

I detailed two leaders in the utilities market, NextEra and Xcel Energy, in the last section on ESG and green energy. And inside the Incredible Dividend Machine, each of the dividend cycles has very dependable distributors of income that you can count on in thick and thin times.

But overall, the proof of value now and for longer-term gains and income is shown in the Vanguard Utilities ETF (VPU). Since coming to the market, it has returned 339.7%, which equates to an annual equivalent of 9.3%. That’s not only good and reliable, but it bests the S&P 500 Index by an ample sum for the same period.

And with its yield of 2.8%, which continues to increase in distribution annually over the past five years by an average of 4.3%, it makes for a reliable source of portfolio income that also bests inflation.

The bottom line is that a portfolio is just that; a collection of investments meant to provide growth over time and income along the way during all sorts of economic and market conditions. REITs and utilities are bargains right now, and you should use the opportunity to buy and add to those segments in your own portfolio.

Total Return Portfolio

The allocation of the Total Return Portfolio is heavy towards bonds and cash and has been for some time. Cash yields very little, but the Synchrony High Yield Savings Account still offers 0.75%, which is a good spot to park cash through the elections.

Bonds should continue to benefit with more yield and less risk than stocks. For September, the US Aggregate Bond Index, along with the US Corporate and Municipal Indexes are flat to higher. And of course, interest continues to accrue in the underlying bonds.

More importantly, all three of the leading bond indexes are outperforming the S&P 500 year to date before the interest and coupon payments are figured in. Simply put, bonds represent a better risk/reward proposition even before the current challenges to stocks. Look at the fixed income recommendations throughout the portfolios and make sure that you own the bonds, the preferreds and the funds right now.

In particular, municipal bonds are offering some real opportunities. A number of analysts were looking

at state and local authorities during the COVID-19 mess and making the case that tax revenues were going to plunge, creating blackholes on income statements for many muni-issuers.

But I continue to learn that, from sales to property taxes, many authorities are seeing higher receipts than last year despite the COVID-19 challenges. Even states that were warning of major troubles, including New Jersey and California, are now seeing receipts well above budgets. And many cities have been finding that online sales taxes are more than making up for local shop receipt shortfalls. So, municipals are in better credit shape than was anticipated, and municipal bonds are values right now for safety and income.

I also recommend more of a focus on ESG investing. And this includes the bond market, where green bonds are surging in demand. This is leading to our new electoral hedge and ESG bond investment in the iShares ESG Aware USD Corporate Bond ETF (SUSC).

Gold: Good & BadGold is another safety hedge through

the election. But there’s a near-term risk right now in the rebounding US dollar. With stock-selling, dollars and cash have been in demand, aiding the Bloomberg US Dollar Index.

A rise in the dollar makes gold less attractive in dollar terms. But with US interest rates on the floor, any drop in gold prices is a time to buy Franco-Nevada (FNV), which has performed well so far this year with a return of 35.6%.

120

110

100

90

80

70


110.94

101.08

1.60

1.40

1.50

1.30

1.10

1.20

1.00

2.80

2.60

2.20

2.40

2.00

1.80

24.00

20.00

22.00

16.00

18.00

14.00

12.00

23.55

2.451.44




34.00

32.00

36.00

30.00

24.00

20.00

22.00

28.00

26.00

10.00

9.00

11.00

8.00

6.00

4.00

5.00

7.00

9.2431.17



S5INFT Index

5.98

SPXEWI Index

-10

0

-20

30

10

20


2020


300

280

260

220

240

200

180



10

-10

-15

5

0

-5


30

35

40

45

25

20

15

2019 2020


38.47

SepJunDec MarSep

20

30

10

0

-20

-10




3.20

2.80

3.00

2.60

2.00

2.20

2.40


201820172016 2019 2020

125

115

120

110

105

100

111.97

2.38

BBREIT Index

Bloomberg US REIT Index Price to Book & Book Value



However, there’s another intermediate-term risk emerging for gold involving ESG. Gold is mined. Miners aren’t paid all that well. This brings concerns to the “social” component of ESG. And mining gold is far from environmentally friendly investing. In fact, it’s a very dirty process in many mining operations. This is now beginning to get some notice with the rise of ESG. But a spin on this is that if mining companies begin to get more ESG-compliant, then gold production may well subside for a while, limiting new supply and helping spot prices.

These Stocks Will WorkIn this issue, I further make my

case that ESG investing isn’t a fluke, nor is it a passing fad. Fund investors and beneficiaries for institutional investments, including endowments and pensions, are increasingly demanding ESG-compliant stocks and bonds. And while many of the individual stock holdings are ESG-friendly, there is the opportunity for more of an indexed investment.

Then, add-in the elections and ESG is a good hedge post-November. ESG is already outperforming the general stock market with the current mix of leadership in Washington. And any changes will likely accelerate the capital flows to ESG as well as legislative and regulatory support for ESG-compliant companies.

Our new addition of the Vanguard ESG US Stock ETF (ESGV) to the Total Return Portfolio provides a very visible fund that is gathering more cash in its assets along with more demand for ESG investments.

Then, take another look at many of the successful companies in our portfolios that are less tied to indexes. Compass Diversified Holdings (CODI) keeps its underlying businesses humming along and earning lots of cash, which it uses to pay that nice 8.1% yield. CODI remains a good buy under $19.00, ideally for a taxable account.

Ericsson (ERIC) keeps gaining contracts for equipment for fifth-generation (5G) wireless around the world. The 5G buildout is separate from

election risk and other challenges. Buy ERIC under a raised price of $12.50, ideally for a taxable account.

FMC Corporation (FMC) continues to do well for us with a return so far of 43.7%. This agricultural yield enhancement company with its pest and weed controls as well as farm technologies remains in demand the world over. Buy FMC under a raised price of $112.50, ideally for a tax-free account.

Hercules Capital (HTGC) is the venture funding company for early- to later-stage technology companies. It remains very efficient in its operations and profitable in its net interest margins. Yielding 11.1%, it makes for a good under-the-radar buy under $12.25, ideally for a taxable account.

Waste Management (WM) has returned 33.4% for the portfolio so far and remains in demand for hauling away our Amazon (AMZN) boxes and bags. And as a rising ESG star with green energy from waste (EFW), the stock should see more demand. Buy WM under a raised price of $117.00, ideally for a tax-free account.

Zoetis (ZTS) continues to work with the surging demand for pet care as well as livestock production. Vaccines for all sorts of threats, including renewed bouts of older viruses, make this the go-to company for its products and services. ZTS remains a solid buy under $163.75, ideally for a tax-free account.

REITs are highly defensive stocks right now and are presenting many values. One in particular is Life Storage (LSI). Not only does LSI have the defensive self-storage market well in hand, but the Warehouse Anywhere service provides localized warehouse space with active onsite management. It’s gaining ground in the remote-working and shop-at-home markets. LSI is a buy under a raised price of $108.25, ideally for a taxable account.

The Incredible Dividend Machine

The Incredible Dividend Machine continues to provide a series of holdings that generate income in the three

cycles and pay monthly dividend flows throughout each year.

The current market challenges will continue to impact stocks across different markets and sectors. But at the same time, dividend-paying stocks provide a refuge over stocks and investments that pay no income.

With elections and politics getting ever more heated, stocks in more basic industries and sectors will continue to do business and perform with less headline risk or market index risk. Of course, dividends pay you to be patient during market volatility and even downturns.

Cycle AOne of the more defensive companies

in Cycle A is BCE Inc. (BCE), the Canadian communications company that is far and away from the troubles in Washington. It continues to pay an ample yield of 6% and also provides gains over time with its return of 293% since being added to the Machine.

Data centers remain critical for the economy through thick and thin. And one of the companies that doesn’t get enough credit for its centers, including its Amazon (AMZN) exclusive centers is Corporate Office Trust (OFC). It yields a nice 4.7%, which is above many of its peers in the REIT market and the data center space.

Merck (MRK) is one of the premiere pharmaceutical companies for the US and the globe. And the COVID-19 threat makes it all the more important with treatments in development and a vaccine in testing. The company’s vaccine is a one-stage product, which puts it at a potential advantage over two-stage vaccines from its competitors. And with a yield of 2.8%, it is a mission-critical drug company with a nice dividend along the way.

PPL Corp. (PPL) is in the process of divesting itself of its UK business assets so that it can focus on its US operations. The potential proceeds will be a massive cash infusion, which could be deployed for more ESG green power capabilities. Use the current softness in the stock price along with its 6.2% yield to buy more.

One of the electoral risks of a change in the White House is the potential regulatory risk. This is particularly true


for banks and major financials, which would be subject to a renewed heavier hand by the Treasury and Federal Reserve with a change. This makes alt-financials such as Sixth Street Specialty Lending (TSLX) all the more attractive, as it should remain under the radar from new regulators. And with its 9.1% yield, it makes for a great source of income.

Xcel Energy (XEL), as noted earlier, is a major ESG green power company. This will continue to garner more interest from both individual and institutional investors. The yield is a little lower, but growth potential from green energy makes for a good total return investment.

Cycle BAT&T (T) and Verizon (VZ)

remain well-placed for current income with their yields of 7.2% and 4.1%, respectively. And with the evolution and rollout of 5G, service demand and revenue should continue to advance.

AT&T also is gaining in its content, including the entertainment and news from its Warner Brothers unit. Even with theaters closed or limited, view-at-home remains ever stronger. And eventual deals to allow streaming apps on additional platforms will mean further revenue growth.

Verizon may lack content, but it is expanding its wireless customer base. With further pay-as-you-go customers on top of traditional contract customers, 5G revenue should continue to show further progress that feeds that nice dividend yield.

Cycle CBlackRock (BLK) is a newer

member, but it has returned 46.8%

since we added it to the portfolios. Assets under management (AUM) in its indexed and active funds continue to impress. And its leadership in ESG investments puts it above its peers in the asset management market. Add in the contracts with the US government for retirement funds for federal employees as well as with the Federal Reserve to run much of the bond- and credit-buying and this continues to be a defensive company through and past the elections.

Dominion Energy (D) continues to show the way towards more of an ESG investment with its massive turn toward and expansion in green energy. With its wind and solar along with backup natural gas and other power sources, it is showing the market that a traditional power utility can become green and evermore profitable at the same time. Yielding 4.8%, it remains a good ESG buy.

As noted in Cycle A, the potential changes in the White House will lead to regulatory headaches for traditional banks and financials in the US. Main Street Capital (MAIN) is another successful alt-financial that provides loans for middle-market and other businesses and does so very efficiently. With a very attractive yield of 8.1%, it makes for an electorally defensive investment.

Model Mutual Fund Portfolios

The Model Mutual Fund Portfolios provide index funds that are meant to follow along with the general focuses of the Total Return Portfolio. The Fund Portfolio as well as the Vanguard and

Fidelity Portfolios contain similar funds.

For stocks, each has a defensive take on the general US stock market with dividends. Then, positions in REITs and utilities for safety and dividend income. Also, I’ve added in information technology and healthcare for the growth aspects of those allocations.

For fixed income, I have both corporate and preferred stock funds that continue to

perform with the market demand along with higher income levels. Municipal bonds remain one of the bigger values right now for taxable accounts and higher taxable equivalent yields. And for tax-free accounts, you get the ability to garner good yield while also getting capital gains along the way with higher muni prices.

Following the ESG theme of this issue and the changes inside the Total Return, I’m adding ESG-specific funds to the Model Mutual Fund Portfolios.

In the Fund Portfolio:With its ESG stock focus and

dividend yield of 1.3%, add the Vanguard ESG US Stock ETF (ESGV) to the stock allocation.

Then, add the iShares ESG Aware USD Corporate Bond ETF (SUSC), which focuses on corporate green bonds, to the fixed income allocation.

In the Vanguard Portfolio:Inside the stock allocation, add

the Vanguard ESG US Stock ETF (ESGV).

For the fixed income allocation, add the Vanguard ESG US Corporate Bond ETF, which is pending its listing under the ticker VCEB. Keep some cash on hand, and I will let you know when you can place your order.

In the Fidelity Portfolio:Add the open-end Fidelity US

Sustainability Index Fund (FITLX) to the stock allocation. It tracks the MSCI USA ESG Leaders Index.

For the fixed income allocation, add the Fidelity Sustainability Bond Index Fund (FNDSX), which tracks the Bloomberg Barclays MSCI US Aggregate ESG Choice Bond Index.

Both open end funds are no-load with no 12b-1 fees and cost between 0.10% and 0.11% (10-11 basis points) annually.

Niche InvestmentsThe Niche Investments is my farm

team of stocks getting ready for the “big leagues” of the main portfolios. These investments are compelling but need to prove themselves a bit more before they can move up. As such, buy them in smaller sums than for investments in the main portfolios.

Activision Blizzard (ATVI) resumed

The Fund PortfolioStocks (56%)Vanguard ESG US Stock ETF (ESGV)Vanguard High Dividend Yield ETF (VYM)Vanguard Real Estate (VNQ)Vanguard Utilities ETF (VPU) Vanguard Information Technology ETF (VGT)Vanguard Health Care ETF (VHT)Fixed Income (44%)Intermed.-Trm Corporate ETF (VCIT)iShares ESG Aware USD Corp. Bond ETF (SUSC)iShares Preferred and Income Securities ETF (PFF)SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (TFI)Cash (11%)


its price gains after a dip in early September, even as the S&P 500 had further challenges. The electronic gaming company is a blend of a tech company and an entertainment company, since its success is driven by its content.

The company has an edge over rivals since it has games on all of the major consoles, including the Microsoft (MSFT) Xbox and Sony (SNE) Playstation, as well as on PC and mobile devices. All of this makes for a strong post-pandemic stock over time. And with a dividend, it’s unique in this sector of online companies. Elections are a non-issue for the company and its stock.

B. Riley (RILY) is in the right markets at the right time. It has its forensic

accounting, business valuation and bankruptcy and retail store closure units as well as its specialty finance and trading on top of its focused asset management units. Insider buying continues, including massive additional buys by the CEO and founder, Bryant Riley.

The company recently consolidated its named business units, making for more brand awareness. Yielding 4.5% and as a defensive stock ahead of the elections, it makes for a compelling buy in my book.

BlackBerry (BB) has a nostalgic name with totally different products and services. The eponymous phones are in the past, but its data security is just what the markets want with cybercrime on the rise. And its technologies for automobiles, from infotech to

autonomous driving interfaces and security, are also in great demand. The stock is a bargain, and it’s on the cutting edge of what’s going on right now.

Centene (CNC) is another one of my electoral hedge stocks. The company is the leading administrator for Medicaid as well as a major part of the ACA. And it also provides the administration for government and military healthcare. Any change in leadership post-elections will be a further boost for the company.

Pets are very important to households around the US, especially for me with my miniature dachshund, Blue. And Covetrus (CVET) is the innovative supplier for veterinarians around the nation. It was spun off from a nearly century-old company and is quickly gaining control of its market. Buy it if you haven’t already.

Gray Television (GTN) is getting ample ad-buying during the electoral cycle on top of ad-buying during the resumption of US sports. With piles of cash and proven deal making, it’s a buy through and past the elections.

Used cars are soaring in

demand. This is leading to dealers going to more auctions and paying up for needed inventory. This puts KAR Auction Services (KAR) in the driver’s seat right now, and the auction company continues to improve its business operations.

Samsung Electronics (SSNLF/005930 Korea) is a tough stock to buy for some brokerage companies. But it’s worth the effort. This is a world-class global technology company that’s also one of the cheapest in terms of valuations. At barely more than book value and trailing sales, the stock is a bargain buy right now.

TDK Corp. (TTDKY), like BlackBerry, is an old-name company known for its past products. But the name belies its cutting edge, next-era products. From power for 5G transmissions to electric motor gear for electric vehicles, as well as additional products for autonomous vehicles, this classic company is a great buy now, before more investors figure out its value.

Niche InvestmentsName (Ticker, Yield) T/TF Buy UnderActivision Blizzard (ATVI, 0.5%) TF $84.50B. Riley Financial (RILY, 4.5%) TF $28.25BlackBerry (BB, 0.0%) T $5.20Centene (CNC, 0.0%) TF $70.00Covetrus (CVET, 0.0%) TF $24.75Gray Televison (GTN, 0.0%) TF $16.25KAR Auction Services (KAR, 5.1%) TF $18.50Marine Products Corp. (MPX, 1.5%) TF $18.50Ritchie Brothers Auctioneers (RBA, 1.5%) T $64.25Samsung Electronics (SSNLF, 2.7%) T $52.50TDK Corp. (TTDKY, 1.5%) T $114.40Thor Industries (THO, 1.8%) TF $118.50**Annual Yield

The Fidelity and Vanguard PortfoliosFidelity (800/544-8888)

Stocks (56%)Fidelity High Dividend ETF (FDVV)Fidelity MSCI Real Estate ETF (FREL)Fidelity US Sustainability Index Fund (FITLX)Fidelity US Utilities ETF (FUTY)Fidelity Health Care ETF (FHLC)Select Software & IT Svcs (FSCSX)Fixed Income (44%)Fidelity Sustainability Bond Index Fund (FNDSX)High Income (SPHIX)Principal Preferred Securities (PRFCX)Intermediate Municipal Income (FLTMX)Cash (11%)

Vanguard (800/662-2739)Stocks (56%)Vanguard ESG US Stock ETF (ESGV)High Dividend Yield ETF (VYM)Real Estate ETF (VNQ)Utilities ETF (VPU)Information Technology ETF (VGT)Vanguard Health Care ETF (VHT)

Fixed Income (44%)Intermed.-Trm Corporate ETF (VCIT)iShares Pref. and Income Secs. ETF (PFF)Tax-Exempt Bond ETF (VTEB)Vanguard ESG US Corp. Bond ETF (VCEB, Pending)Cash (11%)

The Incredible Dividend MachineCycle A (January, April, July, October) T/TF Buy UnderBCE Inc. (BCE, 6.0%) T $45.00 Corporate Office Properties (OFC, 4.7%) T $27.00 Merck (MRK, 2.8%) TF $86.25 Mondelez International (MDLZ, 2.0%) TF $58.85 PPL Corp. (PPL, 6.2%) TF $29.00 Sixth St. Specialty Lending (TSLX, 9.77%)** TF $19.00 Xcel Energy (XEL, 2.6%) TF $72.50

Cycle B (February, May, August, November)Alliant Energy (LNT, 3.0%) TF $54.90AT&T (T, 7.2%) TF $32.50 Colgate-Palmolive (CL, 2.3%) TF $79.20 Verizon (VZ, 4.1%) TF $61.25

Cycle C (March, June, September, December)BlackRock (BLK, 2.6%) TF $595.00 Dominion Energy (D, 4.8%) TF $83.00Duke Energy (DUK, 4.7%) TF $93.00Easterly Gov’t Properties (DEA, 4.6%) T $26.75 Eversource Energy (ES, 2.9%) TF $90.20 Main Street Capital (MAIN, 8.3%)** T $33.75 Public Svc. Enterprise Group (PEG, 3.8%) TF $54.25 *Monthly dividend payer, **Annual Yield

Final ThoughtKnow the Challenges & How to Thrive Through Them

COVID-19 deaths have passed the 200,000 mark in the US. Continuing unemployment claims are running at over 12 million, and renewed recovery assistance isn’t happening in Congress, with the opposition party balking at further aid. The federal government is nearing another shutdown, again with political bickering over just a simple continuing resolution to keep the lights on. Oh, and the elections are in just weeks. It’s no surprise then that September has seen the S&P 500 sink.

But treatments for COVID-19 are getting better, and vaccines are coming in the months to follow. Job creation and recreation is underway, with monthly jobs data showing millions of new or renewed jobs. Consumer comfort levels are climbing back up, and retail sales are ascending. Tax revenues are actually even better than they were last year for many state and local authorities, pointing to a firmer recovery. And the federal government isn’t going anywhere. Elections will eventually settle down, and even contested and delayed results will get solved ahead of inauguration.

In this issue, I make the case for my specific allocations to stocks, bonds and cash that should work through and past the challenges. And we’ve been adding companies that are doing well now and will do even better moving forward. These include ESG-focused stock and bond investments. And I’ve also showcased the very defensive investments in the right real estate investment trusts (REITs) that dealt with lockdowns and are thriving, paying good and rising dividend yields. It’s the same for the dependable essential services of utilities, especially the ESG-friendly energy utilities.

But bonds will be the best lower-risk choice for better adjusted return opportunities. Yields are attractive for corporate and municipal bonds. And with continued demand, gains are still in the works for prices while you get paid nice coupon and dividend payments.

Gold is also still a haven asset through the electoral times, despite the bump up in the US dollar on the demand for more cash recently. It still is benefitting from low to lower US interest rates. And ESG questions over mining might limit supplies, adding to the attraction of existing reserves.

The key thing to remember is that there are plenty of companies that keep working and bonds that keep paying. And that will continue to be the case after the current challenges fade.

As always, I’m always eager to receive your questions, concerns or comments. Please reach out to me and my team at [email protected] or call us at 800-211-8566.

Thank you very much for reading and subscribing.

Neil George

NEIL GEORGE began his financial services career in 1987 with Merrill Lynch International Bank in Vienna, Austria and subsequently held senior positions at what are now US Bank and globally-

based Investec PLC. Neil’s long career has included stints as a bond trader and the manager of a fixed-income fund worth over $1 billion. An income hunter at heart, he’s also the former editor of several successful investment advisories dedicated to finding Wall Street’s best yields. Neil earned an MBA in international finance from Webster University in Europe and a bachelor’s degree in economics from King’s College. His market commentary and insights have been featured in the Wall Street Journal, Barron’s, Bloomberg, CNN and NBC.

Actions to Take This Month

1. The Vanguard ESG US Stock ETF (ESGV) is a new buy in the Total Return Portfolio under $65.00, ideally for a tax-free account.

2. The iShares ESG Aware USD Corporate Bond ETF (SUSC) is a new buy in the Total Return Portfolio under $28.50, ideally for a tax-free account.

3. See page 4 for new ESG additions to the Fund Portfolio and the Fidelity & Vanguard Portfolios.

4. Check the portfolios on pages 7 & 11 or on our website for the latest buy-under prices.

5. Continue to buy and own the stocks and funds throughout the model portfolios, including defensive Utilities and REITs as well as those capitalizing on ESG opportunities.

SUMMARY

thinking it through

Documents