 Page 1July 6, 2016

July 7, 2016

TO OUR VALUED CLIENTS:

As we move forward away from the first two quarters of 2016, it may be a good idea to reflect on a few words of wisdom attributed to billionaire Warren Buffett:

  • Invest in branded companies that have created customer loyalty and repeat business like Coca-Cola, Kraft Heinz, ExxonMobil and so on.
  • Don’t concern yourself about investing in ‘high-flying upstarts’. Boring companies like Procter & Gamble, McDonalds, AT&T might not lead to exciting conversations, but they do often produce excellent long term returns which should be the principal goal for retirement investors.
  • Make sure you have emergency funds that are easy to access. You never know when you will need them.
  • Invest with both growth and income in mind. Most of EFS’s clients are saving for retirement which means they are long-term investors. Focus on investments that not only grow overtime but consistently produce income.
  • Averages and Compound Returns – We all know the market goes up and down so we should look to averages. Historically, overtime the Dow & S&P 500 have increased in an upward slope – just based on growth. Compound returns are a product of reinvesting dividends on an on-going basis so that those dividends earn dividends. For this to work efficiently, it’s advisable to buy good dividend paying companies that grow over time which suggests a Buy and Hold strategy.
  • Learn from mistakes: no one hits a home run all the time; not every team goes to the playoffs and sometimes for reasons or obstacles no one would ever consider, an investment falters. Learn and move on.

On another important matter, we are requesting your assistance. Eagle Financial Strategies will soon be in the process of adding to our staff. We are looking for an individual who wants to be an Investment Advisor and Financial Planner and who is willing to learn the business from the ground up. If you know of someone whom you think we should contact, please let us know.

We trust you are reading our weekly blogs on the website ( which are intended to keep you up to date with our thinking. Please visit the website for our thoughts on the recent “Brexit” vote in Great Britain and the Dow Chemical/DuPont merger.

Sincerely,

Park, Kevin and Andrew

Update Regarding American Realty Capital, AR Capital, and All Related Entities

After many months of research and monitoring by Kevin, Andy and Park, it was decided at our June 16th investment research meeting that we would begin the process of selling out of all positions associated with AR Capital, RCS Capital, Realty Capital Securities and all related entities. There is a popular myth that “there is no such thing as bad publicity”. However, we recognize that this is certainly not true in the investment world and the balance of publicity for AR Capital-related organizations has been negative. It is this history of publicity that is our firm’s primary reason for our decision to exit these positions when we can.

Although most of these holdings have been good holdings with great returns from inception through their liquidity events, our research indicates that the best course of action is to carefully and judiciously reduce and eventually eliminate these holdings, including American Finance Trust, Phillips Edison, ARC Hospitality REIT, ARC Healthcare Trust Inc., ARC NYC REIT, BDCA, VERPRF, VER, and GNL.This move to reduce and eliminate these holdings will give us a greater opportunity to further diversify our client portfolios.

As you may know, our main reason for participating in the redemption programs for the non-publicly traded REITs has been to reduce our positions before the company makes a public offering and begins trading on the open market. Our research leads us to believe that AR Capital is moving to consolidate and merge many of their REITs. We believe that this consolidation of assets is an attempt to “bulk up” the companies in preparation for taking them public or offering them for outright sale. We also believe that the risks associated with the company/companies are no longer consistent with our investment policy for our clients’ accounts.

On Friday, 6/17/16, we sold our entire position in VERPRF at an average price of $25.8524: well above the company’s call price at the par value of $25.00. In addition to locking in a capital gain for our clients, we also enjoyed preferred dividend yields above 6.5%. The sale of GNL and VER will be handled on a case-by-case basis, with special attention being paid to those positions in non-retirement accounts. Non-publicly traded issues will be redeemed when and to the extent redemption is available, and we expect to participate in all reasonable tender offers. We have just heard that American Finance Trust is moving away from semi-annual to annual redemption offers (after previously having quarterly tender offers).
We will continue to monitor the ARC Healthcare Trust, ARC Hospitality REIT and ARC NYC REIT and begin redemption when the programs become available.