On August 11, 2011, Income Growth Advisors, LLC (we) made its first model portfolio change. We dropped Cellcom Israel, LTD (Symbol CEL) and Veolia Environmental American Depository Receipts (Symbol VE) from our 15 Stock Dividend Growth Model Portfolio. Replacing these two securities are Starwood Property Trust (Symbol: STWD) and Westpac Banking Corp (Symbol:WBK).
These changes are consistent with our investment philosophy of investing in companies whose financial prospects offer the most attractive income and income growth prospects. Starwood Property Trust (STWD) is a newly formed Real Estate Investment Trust (REIT) which was incorporated after the real estate collapse of 2007. Consequently, STWD’s assets have been purchased in a distressed environment and are unlikely to be overvalued assets on the balance sheet as might be the case with STWD’s competitiors. This model change capitalizes on the Federal Reserves Board’s new language released August 9th, 2011, (http://www.federalreserve.gov/newsevents/press/monetary/20110809a.htm) targeting low short term interest rates until 2013. Starwood Property Trust should be able to expand its operating margins by capitalizing the more favorable interest rate environment. STWD has a $1.76 dividend and yiled about 10%*. Westpac Banking Corp (WBK) is located in the fastest growing region in the world and should benefit from strong Asian country growth and the commodity rich Australian economy. WPK has seen robust revenue growth from 2008-2010 and its stock has a yield near 8%*. By investing in this bank now, in the wake of the market correction and financial concerns relating to the European debt crisis, we seek to capitalize on a broad based decline in financial stocks and acquire a premiere financial institution unduly punished due to financial risks outside its primary operating environment.**
*Yields are as of today’s stock prices and are based on databses we believed to be accurate and credible, like Yahoo Finance.
**The opinions our website are for clients of Income Growth Advisors, LLC, and are not recommendations for any investor. Investing in these ideas may result in financial loss and is not advised for investors who are not clients. Our Model Portfolios may be unsuitable for you. Our portfolios are subject to change without notice and only our clients will be informed and benefit from portfolio changes.