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Top American Funds Mutual Fund Performers Of Q2 2015

Apart from the top two performers among the American Funds’ mutual funds in the second quarter of 2015, the other funds had lackluster performance. Nonetheless, on comparison with broader markets, American Funds had decent performance. Though American Funds lagged Fidelity’s best gain of 11.6%, it outpaced another behemoth Vanguard’s best gain of 3.8%. It should be noted that Fidelity practices more active management compared to Vanguard’s passive management. If we look at broader markets, we notice the dismal trend. Markets had a dismal run in the second quarter; wherein the S&P 500 and Dow declined 0.2% and 0.9%, the NASDAQ did gain 1.8%. 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. Only four of the mutual fund categories could post above 10% gain in the first half. This is less than half of the 81% gains scored by mutual funds in the first quarter. These losses however owed a lot to the selloff on the eve of the quarter’s end. Coming back to American Funds’ mutual funds, of the 626 funds under study, 232 funds finished in the green while 2 funds broke even. The average gain for these 232 funds was 1.41%. This compares favorably to the average loss of -0.84% for the 392 funds that finished in negative territory. (Note: This number includes same funds of different classes) American Funds’ mutual funds did manage to outperform its first quarter performance. This is unlike what has happened with key rivals; wherein their second quarter performance has dropped from first quarter. In the first quarter of 2015, this fund family which is among the largest mutual fund families in the US based on assets under management, could clock a maximum gain of just 6% in Q1. Foreign/Global and Growth categories were the top gainers for American Funds in the first quarter and they remain so in second quarter as well. Second Quarter 2015 Review American Funds noted: “Global stocks produced mixed returns as signs of improving economic growth were offset by fears of rising interest rates and a worsening debt crisis in Greece. Telecommunications stocks proved to be a bright spot, driven higher by M&A activity, while the rate-sensitive utilities sector fell the most. Emerging markets stocks advanced, supported by monetary easing in China. Bonds declined and the dollar slipped 4% against the euro.” For North America markets, American Funds said that optimism about the growing economy and the Fed’s comments about gradual rate hike were tempered by Greek debt negotiations concerns. Slowdown in earnings growth also dampened stocks. Meanwhile, potential mergers-and-acquisitions and the Supreme Court’s ruling that upheld subsidies under the Affordable Care Act helped healthcare post the strongest gains in the S&P 500. The consumer discretionary and telecommunication services sectors’ gains were also aided by mergers and acquisition activities. Possibilities of higher rates also boosted financial services companies. However, rate hike concerns affected dividend-paying stocks, largely the real estate investment trusts and utilities. Top 15 American Funds Mutual Funds in Q2 Below we present the top 15 American Funds mutual fund performers of Q2 2015: Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded. Q2 % Rank vs Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst. The top performers for American Funds mutual funds largely belonged to categories such as Global/Foreign and Growth. Asset Allocation too had a decent number of funds listed among the best 15 performers. Morningstar data showed that the foreign category of mutual funds have dominated the gains in the second quarter and the first half of 2015 as well. It was thus justified to have 6 funds from the Global and Foreign category. The top two gainers are from Global category. American Funds SMALLCAP World A (MUTF: SMCWX ) and American Funds New Economy A (MUTF: ANEFX ) have gained 6.1% and 4.7%, respectively. Both these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). In fact, the other two funds with Strong Buy rank are also from Foreign and Global categories. These are American Funds EuroPacific Gr A (MUTF: AEPGX ) and American Funds New Perspective A (MUTF: ANWPX ). Meanwhile, American Funds Global Growth A (MUTF: PGGAX ), also from Global category, carries a Zacks Mutual Fund Rank #2 (Buy). The only fund from this category to carry a dismal rank is American Funds Intl Gr & Inc A (MUTF: IGAAX ) as it holds a Zacks Mutual Fund Rank #5 (Strong Sell). American Funds Growth Port A (MUTF: GWPAX ) and American Funds Gr Fnd of Amer A (MUTF: AGTHX ) from Growrth category and American Funds Fundamentl Invs A (MUTF: ANCFX ) from Growth/Income category also made it to the list. However, ANCFX carries a Strong Sell rank and AGTHX holds a Zacks Mutual Fund Rank #4 (Sell). GWPAX has a Zacks Mutual Fund Rank #3 (Hold).

A 13.7% Yield From GreenHunter Resources Preferred Shares

GRH’s oilfield waste water disposal business is running at full capacity and expanding rapidly despite low oil and natural gas prices. GRH-PC is a cumulative preferred issue that now yields 13.7%. Gary Evans has successfully built valuable midstream assets at MHR and is doing the same thing at GRH. GreenHunter Resources (NYSEMKT: GRH ) was initially formed by Magnum Hunter founder Gary Evans with the goal of developing alternative energy sources. The company soon realized that biomass and other “green” energy technologies were unprofitable and has exited that business. GRH is now focused on developing cost effective and environmentally friendly oilfield fluid management solutions. GRH-PC is a par $25 cumulative preferred convertible issue. GRH-PC has a 10% coupon and dividends are paid monthly. It now yields 13.7% at a recent price of $18.25. See prospectus for additional details. GRH-PC dividends were classified as Return of Capital for 2014, which provides some tax advantages. ROC dividends lower your cost basis, but are not taxable as income when received. Given that GRH has accumulated substantial tax losses, GRH-PC dividends are likely to remain ROC for quite some time. Why is GRH’s oilfield waste water disposal business running at full capacity (turning away business in fact) even with low oil and natural gas prices? GRH initially developed operations in several regions, but made the wise strategic decision to focus on Appalachia. Disposal wells in other regions were sold and equipment was moved. This resulted in lower Q1 revenues, but paves the way for future profitable growth. Appalachia is a region where the permitting of disposal wells is a difficult and lengthy process. Waste water must often be trucked for long distances at high cost to be properly disposed of. The scarcity of attractively located disposal wells and the difficulty in building more is a key competitive advantage for GRH. Many GRH customers have signed “take or pay” contracts. They are required to pay for access to the company’s disposal capacity, even if they don’t actually use it. GRH serves customers in the Utica and Marcellus fields. These are among the best fields with the highest returns on drilling. Drilling reductions have been less severe for the Utica and Marcellus fields than for other regions with higher production costs. GRH is doing some innovative things that are years ahead of its competitors. Several new disposal wells are coming online over the next few months that are expected to increase their water disposal capacity by about 50%. These wells are being connected to a central offloading terminal by a network of wastewater pipelines. This is an extremely efficient system that will give GRH a significant cost advantage. GRH has also been building a network of barging terminals along the Ohio River and expects to start barging waste water to their central disposal terminal later this year. Barging is a great solution for the pollution and traffic problems associated with trucking. Note that barges are already being used to transport oil and other cargos that are far more hazardous than oilfield water. GRH estimates that barging is about 25% cheaper than trucking. Ironically, barging has been opposed by some “environmentalists.” Some extremists believe we should shut down virtually all oil and natural gas production, but this is just not practical. GRH is developing the right infrastructure for the safe, cost effective and environmentally friendly disposal of waste water. What are the advantages of owning the GRH-PC preferred stock as compared to the GRH common stock? While GRH is building some unique and valuable midstream assets, it’s been a painful growth process for common stockholders. Preferred holders have continued to receive generous monthly dividends while the GRH common has been diluted to raise additional capital. The preferred dividend was maintained even when cash got extremely tight. Fortunately liquidity has improved greatly as GRH closed a new $16 million secured credit facility on 4/15/2015. Cash flow has been challenging for GRH, but should also improve dramatically over the next few quarters as new disposal wells and barging come online. GreenHunter Resources was founded by Gary Evans and he controls a majority of the GRH common stock. The preferred stock is senior to the common stock, so it’s comforting to know that insiders have such a large stake in the company. Gary Evans is better known for founding Magnum Hunter Resources (NYSE: MHR ). MHR also has a strong record of continuing to pay preferred dividends even when liquidity gets tight ( see my recent MHR article ). The MHR preferred issues rallied when MHR announced plans to sell some of their midstream assets for $600 million-$700 million. Many of my newsletter subscribers (see additional article disclosure) are long-time investors in the MHR preferred issues and were not surprised to see Gary Evans come through. GRH-PC is a smaller issue and is not nearly as well known as the MHR preferred issues. Gary Evans has already shown a knack for building valuable midstream assets at MHR and appears to be doing it again at GRH. MHR preferred stock investors should consider the “other” Gary Evans yield play. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks. Disclosure: I am/we are long GRH-PC,MHR-PD. (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. Additional disclosure: The author is the publisher of the Panick Value Research Report. The Panick Report is focused on high yield preferred stock issue, email mrpanick@yahoo.com for the 2 week free trial.