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More Income for You, More Often

By Dr. Steve Sjuggerud
Friday, May 2, 2008

Right now, we have a rare opportunity...

We can get paid a monthly double-digit dividend... We can buy in for only 85 cents on the dollar... And we can have the skills of a legendary investment manager behind us.

It could lead us to a 60%+ return in two years. Let me show you how...

David Dreman made one of the greatest calls in stock market history. In 1980, Dreman told investors to buy stocks.

Dreman didn't just tell a few clients or friends to buy stocks. He literally wrote the book on buying stocks in 1980. He called it Contrarian Investment Strategies. And he said, "The stock market appears cheap by nearly every historical standard."

Saying "buy stocks" was bold stuff. Stocks hadn't made money in 17 years. But Dreman was absolutely right. After 17 years of losses, the stock market started the longest bull run in recorded history, which stretched from 1982 until 2000.

Fast forward to 2008. Dreman is guarded, but optimistic again. In the upcoming issue of Forbes (dated May 5) he says: "Frightening as the markets look today, there will come a time when the liquidity crisis ends and today's prices for bank stocks look, in retrospect, like bargains."

Today we have a unique opportunity to invest with David Dreman. It's not often that you can get in with one of history's great investment managers at 85 cents on the dollar... and potentially pocket more than 60% gains in two years. But we can today, through the Dreman Value Income Edge Fund (DHG).

Dreman's fund is a safe play. It pays 11.67 cents a month in dividends ($1.40 per year). Always has. As of the end of April, the fund's price was $13.69, so the dividend yield on the fund is over 10%.

Interestingly, the actual value of the stocks and bonds the fund holds is $16.07 per share (as of the end of April). So by buying in at $13.69, we're able to buy in at a 15% discount.

Dreman's Value Income Edge Fund is a bit of a strange beast...

The goal of the fund is maximum returns with minimum variability. That's exactly the way I want to invest. Dreman isn't just sitting in stocks, waiting for them to go up. To achieve his goal, Dreman invests in a unique way...

He invests roughly 65% in bonds and 65% in stocks. You're probably thinking, "That math doesn't add up." You're right. David balances it out with a 30% "short" position in stocks.

David splits his stock positions: half long, half short. And sometimes he borrows a little bit of money to leverage his gains. So he has three strategies going on at once... an income strategy (bonds), a "long" strategy, and a "short" strategy.

The goal, of course, is to minimize risk.

The income strategy portion helps pay the big dividend. The stock strategy – where David buys extremely undervalued stocks – will provide significant gains when the market gets going again. And the short strategy should continually add a few percentage points per year to our returns.

So here's how we get to 60% in two years...

1. Let's say David can grow the fund's underlying value by 10% per year. So $16.07 growing at 10% per year is roughly $19.44 two years later.
2. Now let's assume that the foolish investors who sold in a panic regain their composure, and the fund moves from trading at a huge discount to trading at its fair value – $19.44 in two years' time.
3. Then, let's assume the dividend grows at 5% per year. Over two years, we'd earn a total of $3 in dividends.

So if we could buy today at $13.69, and realize $22.44 (that's $19.44 plus $3 of dividends), we'd make more than 60% – safely – in two years.

Dreman can do better than that. With nearly four decades of experience, he knows what he's doing.

It's not often we can buy David Dreman's management for 85 cents on the dollar – and earn a 10% dividend yield. So you ought to consider the Dreman Value Income Edge Fund today... with the conservative goal of earning a safe return of 60% over the next two years.

Better yet, you should consider our Monthly Dividend Program. Right now, Dreman's Value Income Edge Fund is in our Monthly Dividend Program's Top 10 list... along with nine more of the best high-yield opportunities that will pay you monthly dividend checks.

Good investing,

Steve

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
 
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THIS GOLD CORRECTION IS REALLY NOTHING YET


It didn't take gold long to suffer the $100 decline we warned you about in March... and it's not taking long for the decline to get worse. Gold is down $150 in the past six weeks.

But gold investors take heart. As today's five-year chart shows, the recent selloff is just a blip in the long-term view of things... and a completely natural blip at that.

Gold is following a normal bull-market pattern. It runs higher and higher until it gets too popular and too "tired." Then it corrects, shakes out the weak momentum traders, and plays possum for a while. After gold's huge run-up in the first few months of this year, we're due for one of those "possum periods."

We stand by what we said near the March peak: Gold could correct all the way down to $750 and still remain in its bull trend. If it does actually hit $750 soon, we won't be able to rush checks to our coin dealer fast enough.

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