When it comes to bond investing, Bill Gross is one of the world’s best. Back in 1971, he founded Pacific Investment Management Co., commonly known as Pimco, which now has $1.2 trillion in assets.
Gross is the portfolio manager of Pimco’s Total Return Fund (PTTRX). With $252 billion in assets, it is the world’s largest bond fund.
Despite all the success, Gross realizes he needs to evolve (he’s even recently been an active user of Twitter). To this end, he has moved Pimco aggressively into equities funds. And Pimco should be nicely positioned. Keep in mind that its credit analysis is extensive and should provide a good foundation for spotting attractive stocks as well as avoiding bad ones.
What does Gross like? Last week, he provided some advice in his keynote presentation at a Morningstar conference. Interestingly enough, he appears to be more bullish on stocks than bonds.
As should be no surprise, he is still downbeat on U.S. Treasuries because he says the inflation-adjusted rates are negative and the market has been manipulated by the Federal Reserve’s second round of quantitative easing. Instead, Gross thinks it is better to look at the debt of other countries, such as Brazil, Mexico and Canada. They have higher yields and stronger growth opportunities.
But what is more interesting to Gross are stocks that pay hefty dividends, especially multinationals. They have incredibly strong balance sheets and should benefit from the strong growth in emerging markets. Some of his picks include Coca-Cola (NYSE:KO), Proctor & Gamble (NYSE:PG), and Johnson & Johnson (NYSE:JNJ). Funny enough, these are the top holdings of Berkshire-Hathaway’s (NYSE:BRKA) Warren Buffett.
But in today’s volatile world – where the market quickly goes form “risk on” to “risk off” – it certainly makes sense to have a portfolio of companies that will thrive in any environment. Plus, the yields are attractive when compared to bond investments.
Yet the problem is that Pimco’s equity funds are still fairly new. Thus, if you want to play a dividend strategy, it’s a better idea to look at funds that have proven track records. Some of the top ones to consider are the BlackRock Equity Dividend (MDDVX), Columbia Dividend Income (LBSAX) and Vanguard Dividend Appreciation Index (VDAIX).
Another option is to do what many other investors have had great success with – purchasing shares of Berkshire Hathaway.
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
