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The Market Has Discounted The Biggest Growth Story For The Next Decade

China slowed-growth worries have created a buying opportunity for long-term China. Relative to other international equities – China has value in developed as well as emerging market funds. Investors should consider allocating more capital out of the US which is trading at premium valuations into China trading below historic valuations. Haven’t you heard? Chinese GDP growth is slowing – run for the hills. These seems to be the consensus as Chinese equity markets have taken a plunge YTD . Examine the five-year chart of some popular Chinese ETFs (exchange-traded-funds). (click to enlarge) This dip has created an excellent buying opportunity for certain regions of the world, with China being my top pick. To start I took a look at the major countries and examined the broad ETFs that tracked the respective countries. From there I looked at the sales growth in the funds and removed negative sales; since the focus here is on growth at a reasonable price. From there I accessed data from Worldbank to gather historic and future estimated GDP growth. The results are below, filtered on an average PEG score from low to high. (click to enlarge) China remains my top pick because while growth is slowing; it is still growth! The next four year average growth estimate is still above 7%, with a P/E that is roughly half of the S&P 500. The middle-class continues to expand and disposable income has been on a healthy upward trend. Funds that should do well in the next decade include: SPDR S&P China ETF (NYSEARCA: GXC ), iShares China Large-Cap ETF (NYSEARCA: FXI ), iShares MSCI China ETF (NYSEARCA: MCHI ), and iShares MSCI Hong Kong ETF (NYSEARCA: EWH ). The first three funds are very similar as they are invested primarily in China emerging markets, whereas is 94% developed markets and only 6% emerging. Investors may want to consider one developed and one emerging – which both look attractive after the market correction. If you just want broad exposure to the Asia Pacific region I would recommend the low expense and reasonably valued Vanguard Pacific VIPERS (NYSEARCA: VPL ). This fund is 63% Japan, 18% Australia, 17% Asia developed and 2% Asia emerging. Another interesting way to play China while taking on more firm-specific risk would be to buy a familiar U.S. company with exposure to China. The chart below shows restaurant companies operating income across varied geographic regions: (click to enlarge) My favorite picks in the above list are Starbucks (NASDAQ: SBUX ) with a PEG of 1.6 and Yum! Brands (NYSE: YUM ) with a PEG of 1.7. Other ideas to buy at a discount to the recent selloff with exposure to China include Boeing (NYSE: BA ) who will most likely be unscathed by slightly less growth in this region. Resort companies such as Las Vegas Sands (NYSE: LVS ) or MGM Resorts International (NYSE: MGM ) have fallen more than I would have expected considering the peculiar fact that people tend to continue to gamble even in periods of economic downturns. My prediction is that gambling in the Macau region will pick up and buying now is a good opportunity for the next decade. (click to enlarge) I’m sure there are numerous ways you can conjure to play a re-bound in the Chinese sell-off. I’m interested to hear your comments on what you think the best way to play a rebound in China is. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FXI,GXC,SBUX,YUM,LVS, MCHI over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Best Performing Mutual Funds Over The Last 1, 3 And 5 Years

Market trends so far this year has not been as robust as the previous two years. Like 2014, markets had started with a dismal January but a robust February followed close on the heels. However this time benchmarks have failed to sustain strong gains. In fact, the recent market rout is in stark contrast to the multiple highs that benchmarks kept scoring in recent years. Among other factors, China’s economic concerns and global growth worries, Greece debt negotiation, a stronger dollar and dismal earnings season for both the first and second quarter have taken the sheen away. China had shown promise of continuing the robust run before it hit a hurdle in mid-June. After strong gains, the second largest economy is showing a downtrend as government measures to prop up prices have shown temporary effect. Not only for China, but it may seem that the U.S.’s Bull Run is having to tackle many hurdles. Nonetheless, investors need not lose heart as there are many profitable investment instruments. There are a good number of mutual funds that have above 20% gains in each of the last 1, 3 and 5 year periods. Moreover, these funds also have robust year-to-date return, surpassing the broader markets’ return. The Bull Run might have helped these funds achieve the 20% plus return, but to gain significantly this year is also commendable. Before we pick these funds, let’s look at the markets’ run over these five years. We have narrowed down the funds backed by favorable Zacks Mutual Fund Ranks. Market Optimism in Last 5 Years Stepped-up economic activities, rising business and consumer confidence, record corporate profits, recovering housing fundamentals and continued job creation have injected optimism into the economy. The housing market has gathered enough strength from the lows of 2009, the labor market looks strong with the unemployment rate hitting five and a half year low. Separately, General Motors is very much back in business and Lehman Brothers emerged from bankruptcy in 2012. Annually, real GDP was always in the green since 2009. For 2010, 2011, 2012, 2013 and 2014, the economy grew at 2.5%, 1.6%, 2.3%, 2.2% and 2.4%. The US central bank has kept the rates at record low for a prolonged period. Lower rates reduce borrowing costs for households, corporate and financial institutions. This encourages borrowing and thereby economic activity. Moreover, the central bank carried three quantitative easing programs to spur the economy. The Fed announced in Oct 2014 the end of its bond-buying stimulus program. The quantitative easing program was started during the 2008 recession in order to stimulate jobs growth. During 2013, the third round of monetary stimulus plan announced the central bank would repurchase $85 billion worth of mortgage and treasury bonds. The QE programs were one of the key factors driving markets up. Keep reading our Mutual Fund Commentary section to find out the worst performing funds over 10 years in our next article. Markets in 2015 The year 2015 has definitely not been an impressive one so far. Losses in January was followed by gains in Feb and then ended in the red again in March. Though markets managed small gains in April and May, they were back to the negative zone in June. Focusing on June particularly, the losses for Dow and S&P 500 were the largest since January. The first half performance of mutual funds cannot be termed as very strong. Only four of the mutual fund categories could post above 10% gain in the first half. Just 41% of mutual funds could manage to finish in the green in the second quarter. This is less than half of the 81% gains scored by mutual funds in the first quarter. In the first half of 2015, fund inflow slumped 36% year over year to $143 billion. This significant decline was largely due to the dismal trend in the second quarter; wherein inflows were down to $41 billion through Jun 17, comparing unfavorably with the $102 billion of inflows in the first quarter. Presently, China’s concerns have merged with other headwinds to lead to global market rout. Last Friday, the Dow Jones Industrial Average slumped over 530 points and over 580 points on Monday. The rout was not solitary to the US markets on Friday. On the other side of the Atlantic, the FTSE 100 hit its lowest level this year. Germany’s DAX was down nearly 16% from record highs reached in April. Separately, Japan’s Nikkei slumped roughly 3% to six-week lows. Meanwhile in Australia, the benchmarks are suffering their worst month since the financial crisis in 2008. Funds with Highest Average Returns Let’s now look into funds that have had the best 3 and 5 year annualized gains and also over the year-to-date and 1-year periods. The year-to-date robust gains prove that these funds were not only strong gainers during the Bull Run, but they have tackled the concerns in 2015 as well. We have narrowed down our search to present 5 funds with the highest gains over these periods using simple average calculation. However, the list is dominated by healthcare funds. They carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. The Fidelity Select Biotechnology Portfolio (MUTF: FBIOX ) seeks capital appreciation. FBIOX invests a large share of its assets in companies primarily involved in research, development, manufacture, and distribution of various biotechnological products. Factors such as financial strength and economic condition are considered to invest in companies located all over the world. FBIOX currently carries a Zacks Mutual Fund Rank #1. FBIOX boasts year-to-date return of 8.8% and has returned 27.5% over the past 1 year. The 3 and 5 year annualized gains stand at 35.4% and 35.8%. The annual expense ratio of 0.74% is lower than category average of 1.35%. The Janus Global Life Sciences Fund (MUTF: JAGLX ) seeks capital appreciation over the long run. JAGLX invests a large chunk of its net assets in companies from the healthcare sector. JAGLX invests a minimum of 25% of its assets in companies from “life sciences” sector. JAGLX currently carries a Zacks Mutual Fund Rank #2. JAGLX boasts year-to-date return of 9.5% and has returned over 24% over the past 1 year. The 3 and 5 year annualized gains stand at 34.1% and 28.9%. The annual expense ratio of 0.92% is lower than category average of 1.35%. The T. Rowe Price Health Sciences Fund (MUTF: PRHSX ) invests a lion’s share of its net assets in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences. PRHSX may invest in companies of any size, the majority of fund assets are invested in large and mid capitalization companies. PRHSX currently carries a Zacks Mutual Fund Rank #2. PRHSX boasts year-to-date return of 10.3% and has returned 25.1% over the past 1 year. The 3 and 5 year annualized gains stand at 31.3% and 31.7%. The annual expense ratio of 0.77% is lower than category average of 1.35%. Fidelity Select Health Care Portfolio (MUTF: FSPHX ) seeks capital growth over the long run. FSPHX invests a lion’s share of its assets in companies involved in designing, manufacturing and selling of healthcare products and services. FSPHX invests in companies throughout the globe. FSPHX currently carries a Zacks Mutual Fund Rank #1. FSPHX boasts year-to-date return of 3.5% and has returned over 14.3% over the past 1 year. The 3 and 5 year annualized gains stand at 30.9% and 28.2%. The annual expense ratio of 0.74% is lower than category average of 1.35%. Fidelity Select Retailing Portfolio (MUTF: FSRPX ) invests a minimum of 80% of its assets in securities of firms involved in merchandising finished goods and services to consumers. FSRPX currently carries a Zacks Mutual Fund Rank #2. FSRPX boasts year-to-date return of 5.1% and has returned 15.9% over the past 1 year. The 3 and 5 year annualized gains stand at 20.3% and 22.9%. The annual expense ratio of 0.81% is lower than category average of 1.46%. Link to the original article on Zacks.com

Recent Buy – Brookfield Infrastructure Partners L.P.

Summary I initiated a position in Brookfield Infrastructure Partners LP, a utilities and infrastructure company. The diverse sectors of operations and geography, coupled with regulated and contractual cash flow, makes it a very stable and attractive investment. A starting yield of 5.2% and a 5-year dividend growth rate of 12.6% make it very attractive for income-focused investors. The market jitters continue as the world turns its eyes to the US Fed – will they or wont they raise the interest rates? There are a plethora of dangerous financial situations facing the world which could possibly send the stock and bond markets into a turmoil. I continue to purchase looking for good opportunities trying to tune out the noise as a majority of these occurrences are out of control. Whenever I make a purchase, I like to share my buys to document and illustrate how I am building my income stream over the course of months/years. My main goal is simply to keep investing at regular intervals and build my passive income over the course of time. In staying true to tradition, here’s another purchase in my portfolio, this time adding a new company to my portfolio. I initiated a position in Brookfield Infrastructure Partners LP (NYSE: BIP ) (note: it also trades as BIP.UN.TO on TSX, and since I am a Canadian resident, I bought the TSX-listed shares) with 35 shares @ C$53.20. The stock yields 5.18%, adding US$74.20 (~C$96.50) to my forward annual passive income. Brookfield Infrastructure Partners, even though headquartered and based in Canada & trades on the TSX exchange, maintains its financials (and declares dividends) in USD. Company Overview Brookfield Infrastructure Partners L.P. owns and operates utility, transport, and energy businesses. The company’s Utilities segment operates a port facility that exports metallurgical and thermal coal mined in the central Bowen Basin region of Queensland, Australia; approximately 10,800 kilometers of transmission lines in North and South America; and approximately 2.4 million electricity and natural gas connections in the United Kingdom and Colombia. Its Transport segment provides transportation, storage, and handling services for freight, bulk commodities, and passengers through a network of 5,100 kilometers of track in Southwestern Western Australia; approximately 4,800 kilometers of rail in South America; approximately 3,200 kilometers of motorways in Brazil and Chile; and 30 port terminals in North America, the United Kingdom, and Europe. The company’s Energy segment offers energy transportation, distribution, and storage services through 14,800 kilometers of transmission pipelines; and 370 billion cubic feet of natural gas storage in the United States and Canada, as well as serves approximately 40,000 gas distribution customers in the United Kingdom. Brookfield Infrastructure Partners Limited serves as a general partner of Brookfield Infrastructure Partners L.P. The company was founded in 2007 and is based in Toronto, Canada. Corporate Structure The Brookfield companies have a complicated corporate structure, with each entity intricately weaved with other entities to form a set of public and private companies. The companies include Brookfield Asset Management, Brookfield Property Partners, Brookfield Renewable Energy Partners, and Brookfield Infrastructure Partners. The simple view of where Brookfield Infrastructure Partners fits in under the Brookfield Asset Management umbrella is summarized below. (click to enlarge) Recent Buy Decision I sold my Utilities ETF in June 2015 and have been looking into buying individual companies that can give me dividend growth and better equity ownership. In July 2015, I initiated a small position in Algonquin Power & Utilities Corp (AQN.TO) , and earlier this month I initiated a position in Canadian Utilities (CU.TO) . This adds a third company in the utilities sector. While the classification is under the Utilities sector, Brookfield Infrastructure is, as the name suggests, truly a complete infrastructure company. BIP holds interests in Utilities (39% of revenue), Transport (43% of revenue), Energy (10% of revenue) and Communication Infrastructure (8% of revenue). BIP has a great geographical diversification with operations in North America (8% of revenue), South America (27% of revenue), Europe (34% of revenue), and Australia (31% of revenue). The utilities segment operates: Coal terminals (handles 20% of global seaborne metallurgical coal exports from Australia) 10,800 Kms of electricity transmission lines in North & South America; Regulated distribution of electricity & natural gas connections. The transport segment operates: Railroads: ~5,100 km of track, sole freight rail network in Southwestern Western Australia ~4,800 km rail network in South America Toll Roads ~3,300 km of motorways in Brazil and Chile Combination of urban and interurban roads that benefit from traffic growth and inflation Ports 30 terminals in North America, UK and across Europe One of the UK’s largest port services providers The energy segment operates: Energy Transmission, Distribution and Storage 14,800 km of natural gas transmission pipelines, located primarily in the U.S. Over 40,000 gas distribution customers in the UK 370 billion cubic feet of natural gas storage in the U.S. and Canada District Energy Delivers heating and cooling to customers from centralized systems including heating plants capable of delivering ~2.8 million pounds per hour of steam heating capacity and 251,000 tons of cooling capacity and distributed water and sewage services The communication infrastructure operates: Telecommunications Infrastructure ~7,000 multi-purpose towers and active rooftop sites 5,000 km of fibre backbone located in France Generate stable, inflation-linked cash flows underpinned by long-term contracts with large, prominent customers The diverse sectors of operations and geography, coupled with regulated and contractual cash flow makes it a very stable and attractive investment. A wide economic moat Funds from operations (FFO) have risen at 23% CAGR and distribution has risen 12% CAGR since 2009. BIP is a Dividend Challenger having raised dividends for 7 consecutive years. The current yield is 5.18% and has 1-, 3-, and 5-year dividend growth rates of 11.6%, 13.3%, and 12.6%. BIP has a BBB+ (stable) S&P credit rating and the debt/equity 1.86, and the company holds enough cash to service the debt. Debt repayment schedule has a well laddered maturity profile. BIP just announced earlier this week that it will acquire Australian port operator Asciano for US$6.6B – which will expand the company’s footprint in Australia and help better compete in the space giving BIP better recognition and visibility. The management has made it clear that this is only the beginning this transaction is a ‘stepping stone’ for more expansions in the future. While some share dilution is occurring as part of the deal, AFFO from the deal is expected to increase 7% immediately. Brookfield Infrastructure Partners LP Diversification (click to enlarge) (click to enlarge) Risks As with any investment, there are risks involved. Being in the utilities sector, the risks in the regulated industry is slightly lower. But the non-regulated industry, where most of the growth comes from – can see possible new regulations that could put future growth prospects in doubt. Rise in interest rates can cause the stock prices to tumble in the utilities sector. With international operations, currency fluctuations can cause an unknown movement in revenue, especially since the financials are reported in US$, the international earnings can seem depressed. Further Reading Disclosure: I am long AQN.TO, BIP.UN.TO, and CU.TO. My full list of holdings is available here . Disclosure: I am/we are long BIP, AQUNF, CDUAF. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.