Active Traders

By Michael Molinski, Investing Across Borders
For Fidelity Active Trader

Recently many individual investors have been drawn to an issue that has concerned the financial services industry for several years – the objectivity of research analysts' stock recommendations. Media reports – along with a flurry of lawsuits – have exposed certain conflicts of interest that may exist between research analysts and the firms they work for.

In the past, most large brokerage firms made much of their money from sales commissions paid by investors. Now, as online brokerage competition has driven down commissions, some traditional brokerage firms have grown to rely on their lucrative investment-banking businesses to generate much of their revenues.

In some cases, the role of the research analyst has evolved from that of an independent researcher and number cruncher to someone who helps the firm woo new clients and maintain existing corporate relationships. That can make it difficult for a research analyst to put a "sell" recommendation on a stock, especially if it's a company that the investment bank is doing business with. In fact, annual bonuses paid to some analysts can be partly dependent on the investment-banking clients that they bring in.

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By Eric Uhlfelder, Investing Across Borders
For the Financial Times

There is a corner of the American depositary receipt (ADR) market that offers investors very attractive yields, but about which most brokers and websites know little.

A niche of NYSE-listed foreign preferred shares pay up to 175 basis points more than equivalent domestic issues. And because these investment-grade issues are denominated in dollars, they have virtually no foreign exchange risk - unlike the common ADR, whose value is affected by the performance of the underlying currency of their home shares.

"Investors should consider preferreds issued by well-capitalised foreign banks that offer significant yield premium over comparably rated US preferreds," says Dan Campbell, managing director of global capital products at Deutsche Bank in New York.

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