7 Best Corporate Bonds to Buy and Hold for 2019

Patrick R. McDowell, CFP®, AIF® was quoted in a US News & World Report article by Rebecca Lake discussing the 7 best corporate bonds to buy and hold for 2019.

Allegiant Travel Co. (ticker: ALGT)

Assigned a BB- rating by Standard & Poor’s, Allegiant Travel may be an under-the-radar choice for corporate bond seekers. Patrick R. McDowell, research analyst and portfolio manager at Arbor Wealth Management in Miramar Beach, Florida says smaller carriers like Allegiant have redefined the airline business model, specifically pointing out Allegiant’s focus on profitable flights rather than expanding routes to maintain market share. The current yield to maturity, which represents the total return expected when the bond is held to maturity, is 4.5 percent, making these bonds attractive in the near term, with a stable outlook for the long term. McDowell’s company recently enhanced its position in Allegiant with bonds maturing in mid-2019.

Icahn Enterprises LP Common Stock (Ticker: IEP)

Icahn’s holdings are far-reaching, with investments stretching from real estate to metals. With a BB+ S&P rating, McDowell says these bonds have grown more attractive in a low interest rate environment. Current yield ranges from 5.5 percent to 6 percent annually, depending on purchase price, with bonds reaching maturity in August 2020. “This bond is callable, which scares a lot of potential investors away,” McDowell notes, “But the yield to call is currently far better than the yield to maturity, so we wouldn’t be disappointed if these bonds were called away.” Yield to call is what a bond yields if you buy and hold it until the call date, assuming the call occurs before maturity.

What You Can Learn from the Yield Curve

Patrick R. McDowell, CFP®, AIF® was quoted in a US News & World Report article by Jeff Brown discussing what you can learn from the yield curve.

SHORT-TERM interest rates have been inching up faster than long-term rates, a condition called a "flattening yield curve" that for decades has predicted recessions and put investors into a quandary.

What should investors do? The options range from nothing to changing holdings to employing strategies to either grow or protect the portfolio, to putting money on the sidelines for safe keeping.

"The yield curve is one of the single most effective recession indicators available to us as investors, it is almost never wrong," says Patrick R. McDowell, investment analyst at Arbor Wealth Management in Miramar Beach, Florida. "We believe the yield curve will invert in the next 12 months," he says…

Diversify Your Portfolio By Investing in Timber

Patrick R. McDowell, CFP®, AIF® was quoted in a US News & World Report article by Rebecca Lake discussing how to diversify your investment portfolio.

“Money doesn’t grow on trees” is a popular adage but timber investors might disagree. Timber investments can bring consistent growth to your portfolio.

“Whereas certain assets like cash and bonds can periodically diversify a portfolio away from stocks, they do so at the expense of overall returns,” says Patrick R. McDowell, investment analyst at Arbor Wealth Management in Miramar Beach, Florida. “Timber has been a superior complementary asset to stocks over the last 40 years.”

Don’t limit your horizons. Considering only timber REITs or ETFs may mean missing the forest for the trees, McDowell says.

He offers advice for investors who want to own timber with the dual goals of earning similar returns to stocks while diversifying away from stocks.

“You want to find individual assets that are very reasonably priced that will provide you similar long-term timber returns without paying a premium,” McDowell says.

McDowell uses Keweenaw Land Association, Ltd., a land and timber management company Arbor Wealth Management is a shareholder in, as an example of an individual stock that fits that mold.

“By our valuation, investors today are essentially buying the timberland at cost and getting upside potential from three things: potential REIT conversion, mineral rights development and potential sale of whole company,” McDowell says. “If none of those things happen, we still own timberland at cost which should roughly mimic overall timber performance over a decade long time frame.”

In the meantime, the outlook for timber investments remains positive.

“We expect timber assets to produce anywhere between 5 to 10 percent annually on a go-forward basis,” McDowell says.

How To Hack Your 401(k)

Patrick R. McDowell, CFP®, AIF® was quoted in a Forbes article by Karl Kaufman discussing how to hak your 401(k).

Today is National 401k Day. To celebrate, I asked a selection of financial experts about their best practices on how to 'hack' a 401k.

Patrick McDowell, Investment Analyst, Arbor Wealth Management, Miramar Beach, FL

Use your 401k to enable a backdoor Roth IRA contribution transaction.

You can't make a non-deductible IRA contribution and then convert just that amount into a Roth IRA if you have other traditional IRA assets outstanding.

But, if you have a 401k that allows roll-ins, you can roll your IRA into your 401k and then execute the backdoor Roth IRA transaction.

It's a lot of work to get $5,500 or $6,500 into a Roth IRA and it somewhat limits your investment flexibility but if you have a great 401k plan it can be worthwhile.

The other hack is doing what's often called a self-directed 401k where you can invest in individual securities rather than just the standard fund options available.

Despite Headwinds, Big Tobacco Stocks May Continue To Be A Good Investment

Patrick R. McDowell, CFP®, AIF® was quoted in a Forbes article by Karl Kaufman discussing big tobacco stocks.

Are Big Tobacco Stocks a Good Investment?

The question now is: was last week's earning announcement enough to send Philip Morris stock down more than 16% and Altria stock down 8%? More importantly, are they good entry points to buy, and which company is a better buy?

Patrick McDowell, Wealth Manager at Arbor Wealth Management in Miramar Beach, Florida likes Philip Morris. "If you had to choose one of the two, Philip Morris is probably the better buy simply due to the international focus. The data is always tricky but it looks like international smoking is flat to growing slightly while US smoking is slowly declining."

Another potential source of growth (though still just a pipe dream at the moment) is the burgeoning cannabis industry. With legalization nearing reality on the federal level, Big Tobacco companies have the distribution capabilities in place to package and sell marijuana once it's officially legal. "Imagine Marlboro Reds next to Marlboro 'Greens' at the gas station!" joked McDowell.