Today’s recommendation is to buy Legg Mason Partners Income Trust – Western Asset Emerging Markets Debt Fund (ESD).

music selection: “Come Back” — Bon Jovi

ESD is a closed end fund invested in government and corporate debt in emerging markets.  The debts are denominated in hard currencies, mostly the US Dollar.  Currency risk is thus very low.  This fund trades for an attractive 18.8% discount to NAV.  Just a few years ago the fund traded at parity to NAV so significant capital appreciation upside is possible.  More importantly the .105 per share monthly distribution yields 9.24% against today’s market price of 13.65!   We get paid well to wait.  This investment is best held in a tax advantaged account but will still treat investors in the 25% tax bracket well in a taxable account with a 6.93% effective yield.  That is quite a lot better than the tax exempt municipal bond funds recommended at the Raptor.  More information about ESD is available at the Legg Mason website.

The Raptor was is to have three buckets of about equal size: high yield (including bonds), high growth (especially dividend growth stocks), and cash for writing secured puts on strong businesses with little downside risk.  This blended approach can easily yield an average cash return of 10% or greater.  Such a yield allows early retirement long before the conventional 25 times annual expenses widely recommended.  In fact, only 10 times annual expenses is needed.  A sixty percent reduction!

The raptor recommends a mix of REITs (MORL), BDCs (BDCL), and MLPs (KMI, others), as well as bonds in the high yield category.  The growth category is composed of insurance companies with a strong history of profitable underwriting and Dividend Growth Stocks (written about extensively elsewhere on the web).  The final, exciting, category is to write options for income.  The target minimum is 12% annualized return.  This is frequently available on strong companies such as those in the Big Cheap Tech category and the Dividend Aristocrats.  The early retirement life is good and I highly recommend trying it out!

Devour your prey raptors!

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Buy Legg Mason Partners Income Trust – Western Asset Emerging Markets Debt Fund (ESD)

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4 thoughts on “Buy Legg Mason Partners Income Trust – Western Asset Emerging Markets Debt Fund (ESD)

  • September 20, 2015 at 12:35 am
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    Got EHI, also from same outfit, same difference I guess. Whats that they say about great minds think alike…

    Also use GHY, much shorter duration , and for US only, HHY…

    From a T Rex evolving into a Raptor….

    Reply
  • September 24, 2015 at 12:54 pm
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    Any recommendations that fall under “The growth category is composed of insurance companies with a strong history of profitable underwriting ”

    Life? P&C?

    Reply
    • September 24, 2015 at 1:10 pm
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      You want P&C instead of life. Life companies all use the same actuarial tables and have no underwriting moat. I really like AWH right now.

      Reply

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