Conservative M&A Funds
The turmoil in the financial markets is helping to fuel a new round of mergers and acquisitions—and the M&A-themed funds followed by mutual fund tracker Morningstar (MORN) are handily outperforming the Standard & Poor's 500-stock index.
While the S&P 500 is down 14% this year, Gabelli ABC has lost just 0.71%, Arbitrage Fund has fallen 1.61%, Merger Fund is down 2.53%, and Enterprise Mergers & Acquisitions has slid 7.9%. But Morningstar data show they're not great long-term performers, and fees can be as high as 1.95%.
Despite the funds' risk- embracing names, they aim for steady returns in all markets. In essence they're "low-risk" arbitrage funds that exploit minor differences in stock prices after a deal is announced. They make money by buying the stock of the target company, then selling the stake after the deal closes, at what tends to be a slightly higher price.
Gabelli ABC is the most risk-averse of the group. It's reminiscent of an old-fashioned hedge fund in that the goal of preserving capital in all markets is paramount. Ultraconservative Treasury bills make up about 58% of assets. It also invests in a mix of value stocks and convertible securities, plus a layer of low-risk arbitrage for a little sizzle. Too boring? Enterprise, also run by Gabelli, puts two-thirds of its assets into announced deals and the other third into deals it predicts will happen.
Where You Want Your Money If Oil Dips
Gobs of cash have been lost betting on falling oil prices. But what if Ed Morse, Lehman Brothers' (LEH) chief energy economist, is right about a drop to $93 a barrel by New Year's (BW—July 28)?
For the oil bears out there, ProShares UltraShort Oil & Gas (DUG) exchange-traded fund is down 4.5% for the year but was up 12.5% the week of July 14, when oil prices fell 11.2%. The new Powershares DB Crude Oil Short (SZO) exchange-traded note (ETN) was up 11.1% that week; the Double Short (DTO) ETN—yes, it doubles your bet—rose 25.3%.
An oil-price slide could boost industries such as airlines, autos, and delivery services. But Edward Yardeni, head of his own forecasting firm, dismisses these as short-term plays with limited upside, since oil at $100 or so would still hobble them.
If he were bearish on oil, he says, he'd buy consumer stocks instead, going beyond the few that have done O.K., such as Costco and Wal-Mart, (WMT) and into department stores, general merchandise, even office-supply companies. But since Yardeni thinks oil will stay in the $100-to-$150 range, he'd use a dip to buy energy and metals: "Anything that goes into a Chinese car. That's the long-term structural play."
A Time-Saver for Retirees
In courting the retirement-minded, financial-services company AXA Equitable (AXA) is going for the soft sell. It has launched a retirement-themed portal offering resources, tools, and information on health, leisure, news, volunteering, travel, and investing. Chief Innovation Officer Barbara Goodstein sees myretirementshop.com as a move in the right direction for the insurance industry, which she describes as slow to do more for customers and "go beyond offering products."
The site can be used to find local job and volunteer opportunities, book a vacation, research Medicare prescriptions, order tickets to concerts, even find a plasterer (as this writer did) who will call the next morning. Most of the information can be found elsewhere, but the site packages it well in one spot.