Sizemore Capital Reallocating to High-Dividend Stocks

Given the recent correction in the equity markets and our belief that high-dividend stocks offer better value than bonds at current prices, we felt the time was right to liquidate our position in municipal bonds and to reallocate the funds to high-dividend stocks via an ETF, the WisdomTree LargeCap Dividend Fund (DLN).

DLN is the ideal position for our current strategy. Many of the companies we have recommended in The Sizemore Investment Letter are among the fund’s top holding, including AT&T, Johnson & Johnson, Microsoft, Philip Morris International and Procter & Gamble. In DLN we get a cash yield comparable to a ladder of Treasury securities, but unlike bond interest—which does not increase over the life of the bond—the dividends of DLN’s equity holdings should rise in the quarters ahead.

The market’s currently elevated level of volatility shows no sign of abating, and a general market selloff, were it to occur, could send DLN’s price lower in the short term. But given the attractive pricing of DLN, we would consider any such volatility to be little more than short-term noise. We consider this a low-risk and potentially high-return allocation for the Sizemore Capital Management Tactical Portfolio.

Respectfully,
Charles Lewis Sizemore, CFA

Sizemore Capital Management Second Quarter 2010 Letter to Investors

We made several significant changes to the Tactical Portfolio during the second quarter. The first was the closing of our short position in the euro. In a May 14 trade memo, we wrote,

With negative sentiment on the euro bordering on hysteria, we felt the time was right to take profits and close our short position in the common currency via the Market Vectors Double-Short Euro ETN (NYSE: DRR). All Sizemore Capital portfolios have been sold out of their positions in DRR.