Once demand recovers, or at least stabilizes, Weiss sees good return potential in the sector and said he prefers to avoid companies that concentrate in refining and marketing since they have greater volatility and are therefore recommended for investors with higher risk tolerance and a variable holding period.
Interestingly, the SEC just announced the increasing use of alternative and hedge fund strategies by mutual funds, ETFs andvariable annuities as a new and emerging risk.
The answer is, overwhelmingly, insurance companies peddling high-cost, tax-deferred variable annuities with crappy proprietary mutual fund options and high-risk fixed accounts.
Their dividends are variable, their cash flows less certain and therefore an equity risk premium should exist which compensates stockholders for their junior position in the capital structure.