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What this fund has that other funds |
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don't - a negative beta. |
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Released on Monday, November 7, 2011, 8:00 AM ET
Pittsburgh, PA (SpeculatingStocks) - The New America High Income Fund Inc. (NYSE:HYB), last trading at $10.05 per share (4:00 PM EST November 4th, 2011) is a fund which has a single interesting characteristic. Yes it pays dividends, yes it has a high profit-margin, but what this fund has that other funds don’t is a negative volatility beta. You heard correctly, a negative beta.
Now what exactly do we mean by a negative beta? Well a beta is the measurement of volatility of any one particular stock over a period of time compared to the market. Thus it is the numerical value of the divergence from the market on any given day. A beta of 1.00 means that the stock will move with the market in general, and in just as great a magnitude; whereas a beta of 2.00 means the stock will move two-times as much as the market, but in the same direction.
A negative beta does exactly what it sounds like, moves in the opposite direction of the market. Now why would we want that? Well, in the nature of diversification, you always want to have negative betas to off-set the positive betas in your portfolio. A negative beta does not mean that a stock will trend down over the long-term, in both cases the stocks will likely increase in price, but one will move opposite of the other. Think of two motorcycles climbing up a hill, crisscrossing over each other to the summit, they both get there, just in opposite looking paths.
HYB’s beta is a whopping – 3.63, which means that it will move the opposite of the market and three times as much on any given day, a nice thing to have in your pocket considering the recent down-swings and up-swings in the global markets over the past few days. The fund also has a market capitalization of around $231 million and issues a dividend which yields about 7.10% annually, act fast the dividend record date is around mid-November!
Remember, when looking at your portfolio, in these troubling times, diversify, diversify, and diversify. Sure you may have some lower earnings and slower growth, but you won’t lose your principle—which you kind of need to have earning and growth in the first place. Take a look at New America High Income Fund, it may just be that addition you need.
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