Perspectives Blog

Investing selectively in Asia

Soo Nam Ng, Head of Asian Equities | July 14, 2014

…of Hong Kong, Singapore and Australia where corporate cultures are more shareholder-friendly. But to appreciate their investment merits, the investor needs to value resilient growth over high growth and be willing to harvest dividends over a multi-year horizon. While return expectations from potential share price appreciation may need to be moderated, the investor should consider a more deliberate harvesting of dividends as an equally important…

Surveying the landscape for M&A

Robert McConnaughey, Director of Global Research | March 3, 2014

Cash-rich corporations are increasingly considering M&A. The market is rewarding acquirers generously (for now). How can investors position in front of potential M&A without paying an excessive premium that leaves room for disappointment? Cash balances at U.S. non-financial corporations have exploded in the post-crisis era, despite a rising return of cash to shareholders in the form of dividends and share repurchases. One other option…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…the interest from taxable fixed-income securities such as corporate bonds at their marginal income tax rate. For high earners, this could be 33% or 35%. On the other hand, many investors pay tax on income from qualified stock dividends at a far lower 15% long-term capital gains tax rate. Even investors in the highest income tax bracket of 39.6% face a lower long-term capital gains rate of 20%. Given the significant differential in tax treatment,…

Quality milestone in the European recovery story

March 17, 2014

…trategy, December 2013 An increase in average net debt/EBITDA to 2x from the current 1.6x would provide €400 billion of firepower for growth. As with U.S. corporates, the short-term focus is likely to be on share buybacks and dividends rather than increasing capex. But in a low-inflation/low-interest-rate world, pressure for increased capex and M&A is building. The main risk is that turmoil among emerging markets undermines business confidenc…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…

Should your income be fixed?

David King, CFA, Senior Portfolio Manager | December 16, 2013

…rs. Fortunately, the words “income” and “fixed” are not linked by decree. There are many non-fixed, income-oriented security structures which are suitable for investment, including: – Common stocks with safe, stable or rising dividends – Floating rate bonds – Bank loans – Preferred stocks and bonds with interest rate reset features – Master Limited Partnerships Without question, some of these asset classes are more volatile than investment-grade…

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…al investment growth from near 2% to about 8% this year. The key to getting growth to accelerate beyond 2% is for business to borrow to improve and expand their productive capital, not return it to shareholders in the form of dividends. This capital deepening can begin to close the output gap and is probably what the markets are counting on. We are beginning to see some lift in private sector construction spending on offices, commercial space and…