Faber: Hong Kong Real Estate Shares Attractive, Hold US Treasurys

August 19, 2014


Guggenheim China Real Estate (TAO | C-30)
Faber thinks that property stocks in Hong Kong (HK) are depressed. He believes in playing China's easy-monetary-policy-induced reflation through HK real estate stocks. Fortunately, there's an ETF—TAO—that fits Faber's view to a "T." For 70 basis points, TAO holds roughly 50 real estate companies and REITs from both HK and China. In fact, HK companies make up roughly 80 percent of the fund's weighting. True to Faber's statement, TAO carries a value bias with a low trailing P/E of 7.23. The fund sports a portfolio yield north of 3.5 percent, to boot. Caveat emptor: TAO is a relatively small fund, with $20 million in assets, and trades only $120,000 a day, at 29 bp spreads, so careful trading is warranted.

Market Vectors Gold Miners (GDX | B-63)
Faber highlighted gold mining shares as being "extremely inexpensive." While he prefers owning physical gold, he views both major and junior miners as leveraged plays on gold. GDX has established itself as the de facto way to play the major gold miners, such as Newmont and Barrick. The cap-weighted fund holds 40 of the largest miners that list their shares in the U.S. Canadian miners currently make up roughly 65 percent of the fund. GDX tends to trail its index by only 42 bps on most 12-month stretches. GDX is a powerhouse in the space, with more than $8 billion in assets and trading over $800 million a day, at pennywide spreads.

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