Bermudian-based Ascendant Group Ltd stated on January 28 the company had begun evaluating strategic alternatives including a potential sale of the company.

Then Algonquin Power and Utilities, a Canadian utility, announced on June 3 it had agreed to acquire the holding company of Bermuda Electric Light Co for $36 per share, or a total price of $365 million.

The terms of the buyout are for all cash and the deal is considered friendly. This means both companies are in agreement and make it more likely the transaction will move forward. Investors in the stock should be happy as Ascendant has climbed back from its nadir of just over $4 per share in May of 2016 to its current price of around $30. Shareholders will meet on Friday to vote on the matter. They are expected to approve the offer.

Shareholders can expect to receive their proceeds in USD cash towards the end of the year, but then may be contemplating what to do next. According to Bloomberg data, Ascendant stock last traded on the BSX at $30 and is currently offered for $34.80 as of this writing.

One option for shareholders is to try to sell some shares at current trading levels thereby locking in a price close to the offer value. However, the downside to an early sale is finding a buyer given the lack of liquidity in the stock. In general, trading volumes on the BSX are very thin and often days or even weeks go by without a transaction. Sell orders should be placed with a limit at the best price. Also, any sales on the BSX will be settled in Bermuda dollars.

Because of the liquidity and currency issues, holders may be best served by waiting for the acquisition to be completed at which time they should receive the full offer amount in US dollars.

At that point, shareholders should be careful not to convert the US dollars received into Bermuda dollars at a local bank. The best investment options going forward will likely be in other currencies and switching to greenback has become more expensive. The Bermuda Government recently raised the tax on foreign currency purchases by 25 per cent, from 1 per cent to 1.25 per cent.

As with all investment strategies, sound principles for allocating the funds should prevail. For example, in year’s past, the old Belco offered a dividend yield of as much as 11 per cent before the company slashed the dividend in 2014. At its current price, the stock has been paying at a dividend rate of approximately 1.5 per cent based on its latest payout of 11.25 cents quarterly.

Income-seeking investors have several options. Popular strategies include savings accounts, certificates of deposit, fixed-income funds, preferred stock of Bermuda-based companies, hybrid and high-yield bond funds and dividend income funds and portfolios.

Younger investors or those with a longer-term time horizon may consider capital appreciation strategies. While global equities markets are still trading near all-time highs and might be considered expensive, some sectors of the market have room to catch up to the ongoing rally in asset prices.

For example, so-called “value” stocks, or cheaper securities have underperformed growth stocks by a large margin in recent years. The widely followed Russell 1000 Value index is actually trading below its high price reached in early 2018, well over a year ago, even as the Russell 1000 Growth index regularly sets new record highs.

Whether an investor decides to pursue a capital preservation, growth, or income strategies, they should continue to pay attention to the basic tenants of efficient portfolio construction. In this respect, staying diversified and following managers with a proven track record is key.

At LOM Group, we have strategies for all of the above objectives. For example, our clients have seen profitable results from the LOM Fixed Income Fund USD, Bermuda’s only five-star rated fund by Morningstar. More aggressive investors can consider the LOM Equity Fund, currently up by over 20 per cent year-to-date. Meanwhile, the LOM Stable Income Fund falls in between these two on a risk spectrum basis. The Stable Income Fund pays a current dividend yield of 3.23 per cent its current NAV price and focuses on dividend-paying value stocks.

Most importantly, investors should maintain a reasonable level of diversification. Having too many eggs in the same basket — whether a specific market sector, region or country creates risk. Even here in Bermuda we have seen stalwart companies decline precipitously in price while experiencing painful dividend cuts. Investors often tend to favour that with which they are most familiar, however, a sudden change of fortunes in a particular area of the market can be quite damaging.

John Vogle, founder of Vanguard, was once quoted as saying: “Successful investing involves doing a few things right and avoiding serious mistakes.” Perhaps, the biggest mistake I have seen over the years is lack of diversification.

Investors should consider their personal objectives, sit down with a trusted adviser and design a workable plan for savings and investment to help them reach their ultimate financial goals.

Bryan Dooley, CFA is the senior portfolio manager and general manager of LOM Asset Management Ltd in Bermuda. Please contact LOM at 441-292-5000 for further information. This communication is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. Readers should consult with their brokers if such information and or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority