Dear Mr. Berko:
All the advertisers in the financial media claim to be wizards but either lie or brag only about their successes. Then when you get suckered into their spiels, those stories turn into losses. I’m given up subscribing to stock market investment services, listening to glib financial talk show hosts, attending financial seminars and buying financial magazines that brag about how they always beat the Standard & Poor’s averages. Everybody wants to sell a deal. But none of these liars is worth a darn except for one money manager — who won’t take us back, because my wife was too forceful in objecting to the 1 percent fee he had been charging since 2009. As a result, we have been out of the market for over two years. Could you persuade this person, who knows you, to take us back? If not, I want you to recommend low-cost, high-growth, high-rated mutual funds in which to invest $700,000 for the next 12 years that I won’t need to watch every week. We don’t want to worry about buying and selling; we just want to let the funds grow. Also, make sure that the mutual funds you recommend are all no-load mutuals.
— LS, Durham, N.C.
Dear LS:
That whilom money manager told me your wife is an ogress, a harridan and a harpy. Those are my words; however, they succinctly summarize his four-minute rant about your lesser half. “I’ll consider taking him back on one condition,” he said. “LS has to divorce her, and then I’ll think about it.” I suspect that you already know this!
I would, with alacrity, invest $25,000 in Vanguard Health Care Fund (VGHCX-$208), $25,000 in BlackRock Health Sciences Opportunities Portfolio (SHSAX-$47), $25,000 in T. Rowe Price Health Sciences Fund (PRHSX-$67) and $25,000 in Fidelity Select Biotechnology Portfolio (FBIOX-$204).
Over the coming decades, Congress will be spending an increasingly larger amount of our tax dollars on health care. The health care lobby has borrowed the mantra of the defense lobby: “A vote to reduce defense spending is a vote against patriotism!” So any vote that reduces health care spending is considered a vote against the American family. Lockheed Martin, Northrop Grumman, Raytheon and Boeing have grown their earnings by over 400 percent in the past decade because they have the skills to overbill the government and because lobbyists paid Congress to approve spending bill after spending bill. And so it will be with medical supply stocks, medical appliance stocks, medical service issues, medical data issues, hospital equities and drug company stocks. Corporations such as UnitedHealthcare, Aetna, HCA Holdings, Merck & Co., Johnson & Johnson, Vertex Pharmaceuticals, Celgene, Amgen, Stryker, Cigna and Tennant will roll in newfound riches. There are many things I’m not sure about, but as sure as God made little green apples and the worms therein, health care spending will zoom. That’s the nature of all government-fed beasts, and after defense and Social Security, health care has become the untouchable third rail of politics.
Meanwhile, the one-, three-, five- and 10-year returns for Fidelity Select Biotechnology Portfolio are 17 percent, 34 percent, 26 percent and 15 percent, respectively. During the same period, Vanguard’s fund returned 29 percent, 23 percent, 20 percent and 12 percent, and BlackRock’s performance was 21 percent, 27 percent, 18 percent and 14 percent. T. Rowe Price earned 16 percent, 21 percent, 18 percent and 14 percent. It’s basically a no-brainer.
An excellent pure play on military/defense spending belongs to Fidelity Select Defense and Aerospace Portfolio (FSDAX-$108), which is one of Fidelity’s 2,568 mutual funds. FSDAX stands strong, with one-, three-, five- and 10-year returns of 11 percent, 16 percent, 20 percent and 11 percent, respectively. Two exchange-traded funds, iShares U.S. Aerospace & Defense (ITA-$102) — which owns Textron, Rockwell Collins and TransDigm Group — and PowerShares Aerospace & Defense Portfolio (PPA-$31), which owns Precision Castparts, Honeywell and Heico, have almost tripled in the past five years. Put some of that $700,000 here and the remainder in a money market fund, and contact me again in six months.
I’ve recommended these sectors because military spending and health care spending are two sectors that are very nearly immune to inflation, recession and the economic cycle. And because these sectors are government-sponsored, growing revenues and excessive profits are virtually guaranteed.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.
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