PREMX: The Excellent Performance of the T. Rowe Price Emerging Markets Bond Fund

The T. Rowe Price Emerging Markets Bond Fund (PREMX) is one of the few bond funds with a historical record of delivering returns that are competitive with equities while also giving its investors current income that you’d expect from investing in government debt.

One of the few markets that is not in a bubble territory right now is lower-tier government debt. Everything else looks severely overpriced. Governments like Germany, Switzerland, and the United States are currently paying their bondholders interest that will almost certainly trail inflation over the coming decades, and thus, will leave such investors poorer in 2026, 2036, and 2046 than they were in 2016 (the only reason to make such an investment right now is for liquidity purposes). Meanwhile, large corporations like Microsoft are issuing thirty-year bonds that barely pay 3%, which like large governments, has almost no chance of giving its debtholders a return that will increase purchasing power between the 2015 issuance date and the 2045 maturity.

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ExxonMobil: Dividends When The Buybacks Stop

In my recent Wal-Mart article, I mentioned that one of the risks of owning stock in a company reliant on share repurchases is that there is little recourse left when business conditions deteriorate and there is not enough retained earnings to continue executing a repurchase-reliant strategy to build shareholder wealth.

To get a glimpse of a real-life example, take a look at what is going on at ExxonMobil right now. Between 2000 and 2014, ExxonMobil retired enormous amounts of stock. Exxon had 6.9 billion shares outstanding in 2000, and reduced it to 4.2 billion by 2014. Those 2.7 billion retired shares ended up reducing the share count by 3.5% annually.

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Simon Property: High Stock Price, High Debt

Simon Property (SPG) has become quite the fashionable stock since 2012. For almost all of Simon Property’s history, the real estate investment trust (REIT) traded somewhere between 13 and 17x its annual funds from operations. That’s about what you’d expect from an outlet and regional mall landlord. You could reasonably argue that the difficulties in filling malls with tenants should have brought the valuation down to the 13 range, or you could have argued that the low interest rates and generally rising property values should put Simon Property towards the 17 end of that range.

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Wal-Mart Shareholders Should Love A Acquisition

Over the past eight years, the entirety of Wal-Mart’s (WMT) earnings growth has come from a combination of cost cuts and share buybacks. Wal-Mart made $13.5 billion in net profits back in 2008, and this year it is only expected to make around $13.3 billion profits. Despite making $200 million less in expected 2016 profits compared to the 2008 period, Wal-Mart shareholders have nevertheless experienced earnings per share growth from $3.42 to around $4.25 because Wal-Mart repurchased 800 million shares of its outstanding stock to bring the outstanding share count down from 3.9 billion to 3.1 billion.

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Altria Stock: Don’t Buy Right Now

A reason why Altria (MO) shareholders have historically achieved such strong outperformance in the market is because tobacco stocks traditionally traded at a low P/E ratio, had a high dividend yield, and a high earnings per share growth rate. From 1987 through 2007, Altria traded at an average valuation of 13.8x earnings, had an average dividend yield over 5.2%, and achieved annual earnings per share growth of 9.2%. The investors that reinvested their dividends along the way reaped 18.3% annual returns because they benefited tremendously from the reinvestment of dividends at a low valuation.

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