INVEST WHERE OTHERS FEAR TO TREAD FOR INCOME AND APPRECIATION: EATON VANCE’S KATHLEEN GAFFNEY

February 15, 2019

If you were to name places in the world where you wouldn’t consider investing today what comes to mind? How about Venezuela where the economy is in ruins, the president discredited and the opposition mounting? Or a specific company in this country like Pacific Gas and Electric, PG&E for short, the California utility that filed for bankruptcy and bore the physical and legal brunt of the recent devastating California wildfires? Those are fertile ground for contrarian investors or just traditional value investors who look for opportunities where others fear to tread.

Globe-trotting Eaton Vance bond manager Kathleen Gaffney looks where others are fleeing for higher total returns.

WEALTHTRACK Episode #1535; Originally Broadcast on February 15, 2019

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KATHLEEN GAFFNEY

Consuelo Mack

18th century British nobleman Baron Nathan Mayer Rothschild is alleged to have said: “Buy when there is blood in the streets.” He supposedly made a fortune speculating when Napoleon was defeated at Waterloo.  We know for a fact that legendary 20th century investor Sir John Templeton followed his: “Buy in periods of maximum pessimism” principle to great success.

If you were to name places in the world where you wouldn’t consider investing today what comes to mind? How about Venezuela where the economy is in ruins, the president discredited and the opposition mounting? Or a specific company in this country like Pacific Gas and Electric, PG&E for short, the California utility that filed for bankruptcy and bore the physical and legal brunt of the recent devastating California wild fires? Those are fertile ground for contrarian investors, or just traditional value investors who look for opportunities where others fear to tread.

This week’s guest is just such an investor. Her specialty is fixed income but she has the latitude to invest around the world, anywhere in a company’s capital structure and she revels in the hunt. She is Kathleen Gaffney, Director of Diversified Fixed Income at Eaton Vance where she is also the lead portfolio manager of the Eaton Vance Multisector Income Fund, which she launched as the Eaton Vance Bond Fund when she joined the firm in early 2013.

The fund is known for its flexibility to seek higher total return opportunities wherever available in the world and the capital structure of the companies chosen. That approach has also meant “significantly more volatility” than its peers in Morningstar’s Multisector Bond category. It carries a 3-star rating but is ranked in the top one percentile for the last 3 years, the middle of the pack for the last 5 and has beaten its benchmark since inception.

Gaffney is also lead portfolio manager of the somewhat more traditional Eaton Vance Core Plus Bond Fund. It carries a 5-star rating and has ranked in the top performance percentiles for the last 3 and 5 year periods under her leadership.

The last time I sat down with Gaffney in late 2017 she told us we were at an important inflection point, shifting from a secular decline in interest rates to a gradual rise. She will share her views of where we stand now.

If you’d like to watch any of our programs ahead of their official broadcast they are available to our PREMIUMviewers on our website about 24 hours before. You’ll also find the EXTRA interview with Kathleen Gaffney about her technique to keep mentally fresh.

If you would prefer to take WEALTHTRACK with you on your commute or travels, you can now find the WEALTHTRACK podcast on TuneInStitcher, andSoundCloud as well as iTunes and Spotify.

Thank you for watching.  We hope you had a happy Valentine’s Day. Make the week ahead a profitable and a productive one.

Best regards,

Consuelo Mathews Asia

TAKE ADVANTAGE OF THE HIGHER INTEREST RATES AVAILABLE IN CASH

CASH COUNTS

  • Best performing asset class 2018
  • 3 month T bills +1.9%
  • Cash can provide a positive return
  • Competitive rates available

RAISE YOUR OWN RATES

  • Higher rates available than savings accounts at commercial banks and most brokerage firm cash accounts

YIELD BOOSTERS

  • Savings accounts at online banks offer +2% yields, Federally insured up to $250,000
  • Short term U.S. Treasury yields are +2%<

No Bookshelf titles this week.

IMPROVING EMERGING MARKETS

  • Buy a Latin American index fund with high Brazilian exposure
  • Recommends iShares Latin America ETF (iShares S&P Latin America 40 Index -ILF)
  • Provides exposure to companies without a lot of specific risks
  • Diversified without currency risk

  • JBS S.A. / ADR U.S. OTC (JBSAY)
  • Suzano Papel e Celulose / ADR (SUZ)
  • Pacific Gas and Electric Company (PCG)
  • Lennar Corporation (LEN)
  • iShares S&P Latin America 40 Index -ILF
This transcript will be available soon. More information regarding WEALTHTRACK transcripts can be found here

Kathleen Gaffney from the WEALTHTRACK Archives:

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MENTAL RENEWAL

How does globe-trotting, award-winning diversified fixed income manager Kathleen Gaffney stay mentally fresh? We asked her. Kathleen Gaffney recommends two guided meditation podcasts:


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