Mish has listed some good reasons for why there is no cause for inflation fears. If a global slowdown is awaiting us in the future, this of course would mean that commodities and materials would continue their fall in prices.
However, at the moment, its difficult to see what appears to be great opportunities in the energy-related sectors. One stock that I’ve been eying is closed-end fund Tortoise North American Energy Corporation (TYN).
Recently, TYN has been trading at a steep discount to its NAV. For the past couple of weeks TYN has traded at 15-20% discount. I’m fairly certain the large increase of the discount to NAV is due to the large commodities correction: people simply wanted out of TYN. Also, TYN’s price has visited an all-time low and it has a very good distribution rate of 8.14%.
I believe TYN would be a good target for an activist like Bulldog Investors or Western Investment for the simple reason that TYN has traded at a steep discount since its inception in 2005. If an activist investor were to become interested in closing this large discount, I think hedging would be relatively easy.
All commodities have experienced a large, much-needed correction. Oil, energy, metals, food; all the basic materials. The dollar has made a large move up. However, I’m not certain that we are at the beginning of a strengthening dollar just yet. I still believe America has a large inflation problem. Though there seems to be more evidence of global growth slowing down, which would bring down the price of commodities and materials down even more, I think now is a good time to take advantage of the dollar and commodities correction.
Here’s a chart of the Euro versus the US dollar:
There may or may not be further downside for the Euro. I’m guessing the dollar will weaken again over the next six months.
Here’s a chart of the gold ETF:
Gold usually increases along with inflation and oil. If we’ve got an rising inflation and oil, gold will go up.
Here’s a chart of the price of platinum:
I particularly like the prospects for platinum. I recently purchased some Jan. 2010 calls on Stillwater Mining (SWC), the only US producer of platinum and palladium. With many good reasons to expect a continuation of a commodities bull market, and this recent large correction, I felt the time was right to make such a purchase.
The New York Times reports on the building of two large solar power plants by California. Of particular interest to me was a new type of photovoltaic technology, which apparently can turn electricity directly into sunlight.
This might be just an editing error. A funny one.
Or maybe I am sorely mistaken about how solar technology works?
One does not associate Sears with fashion. The first thing that always came to my mind are large refrigerators and lots of tools. But perhaps Sears will be able to improve its image in the world of fashion after their upcoming showcase at New York’s fasion week in September.
Sears, Roebuck and Co., a subsidiary of Sears Holdings Corp. said on Wednesday that it will unveil a lifestyle exhibit on Sept. 10 in New York’s Bryant Park, where fashion’s biggest names parade their spring collections on catwalks set up under big, white tents.
The retailer, not known for fashionable clothes, faces a hurdle convincing shoppers of its chic factor. It is also following in the footsteps of discount retailer Wal-Mart Stores Inc., whose attempt to ratchet up its fashion credentials at the same event backfired, hurting profits in 2007.
Sears’ exhibit, open to the public, will showcase brands Sears already offers in its stores, like Kenmore appliances, as well as new brands that it is introducing, like a clothing line by rapper LL Cool J.
The article also mentions how Wal-Mart’s showcase at the fashion week in 2005 was a bit of a flop. By 2007, Wal-Mart scrapped its Fashion Week plans because “[i]ts shoppers proved more interested in basic, affordable clothes than trendy fashions like skinny jeans, leaving Wal-Mart with heaps of unsold clothing to mark down.”
Hopefully this will be a net gain for Sears.
Disclosure: I own Sears (SHLD)
If you’re a trader, Gold Stock Bull lists three areas where one should probably be able to profit: financials, the dollar, and energy. With energy, Petrobras is the particular stock mentioned right now that seems to be a both a good trading and investing opportunity.
I also agree with the general outlook on energy. Oil was greatly overvalued, but now it seems that there has been an over-correction. But perhaps not, as I have been hearing that there is some evidence of a greater worldwide economic slowdown, and thus a decrease in demand for energy.
Alleghany Corp (Y) last Friday field its 13F-HR, its securities holdings report. There are 13 new holdings, though they are all quite small relative to their entire portfolio. However, I still would like to analyze further some of their new holdings.
What stands out most to me is that eight of these new holdings are related to the energy/oil/gas industries. In general, I think all these new holdings are in some way related to energy or construction. I guess this is not surprising considering the recent decline in oil and the sell-off of all oil- and energy-related companies.
The new holdings are (from largest to smallest investment):
- CBI - Chicago Bridge & Iron Co
- GLBL - Global Industries Ltd
- TRMA - Trico Marine Services Inc
- PBR - Petroleo Brasileiro
- KEGS - Key Energy Services Inc
- EOG - Eog Resources Inc
- FTK - Flotek Industries Inc
- MDR - Mcdermott International Inc
- PXP - Plains Exploration & Production Co
- STO - Statoilhydro ASA
- XTO - XTO Energy Inc
- CCJ - Cameco Corporation
- NS - Nustar Energy LP
I will most likely look closely at CBI, GLBL, and TRMA. Trico Marine in particular looks appealing since it has fallen quite a bit and its Chairman and CEO recently purchased 10,000 shares.
The Royal Gazette reports that XL Capital’s (XL) CEO Michael McGavick recently purchases $2 million of his company’s stock:
XL Capital Ltd. chief executive officer Michael McGavick has shown his confidence in his company bouncing back from its recent hard times by spending $2 million of his own money on the Bermuda-based insurer’s shares.
A regulatory filing on Thursday showed that Mr. McGavick purchased 110,000 XL shares on the open market at $18.19 apiece, thereby quadrupling his holding in the company he leads.
Another insider to give personal financial backing to the company was former Bermuda Governor Sir John Vereker, an XL director, who invested nearly $50,000 in its shares, also on Thursday.
Mr. McGavick has been in the XL hot seat for three months, succeeding Brian O’Hara, and has experienced a baptism of fire during one of the most difficult periods in the company’s history.
A company’s CEO purchasing large amounts of stock on the open market is a very positive sign. I’ve written about XL previously in connection to their exposure to the massive storm and flood damage Iowa saw not too long ago. XL’s stock is down over 70% for the past 12 months. I am seriously thinking about establishing a small position in XL with this recent bit of news.
I used to be begin into technical analysis. I still find it interesting, but I certainly will never rely upon it. It’s about as useful as looking at goat entrails when it comes to purchasing stocks that will be gain in value over time.
That said, I just wanted to revisit a prediction I made in April this year based on a chart I created of the S&P 500. With the S&P at 1400, I predicted another steep drop to about 1200 in the coming months. Well, It looks like my prediction came true.
Of course, there were a multitude of factors that contributed to this outcome. It wasn’t just the chart and it wasn’t my extraordinary intellect. It could be luck. It’s probably just my belief that financials were going to get much worse before they got better, and that they drag down the rest of the market with them.
After reading Buffett and Graham, I’m now more wary than ever about trying to predict the future; it’s simply not a productive use of time. Time is best spent researching stocks in order to find which are undervalued and present a bargain and margin of safety.
I’ve known for 4-5 months that famed value investor Seth Klarman has been invested in two paper-related companies: International Paper (IP) and Domtar (UFS). It seems that lumber and paper-related companies have been particularly out of favor. However, International had a great day, gaining nearly 14% after announcing net earnings gains of 20%. In fact, Bloomberg reported, “International Paper Soars Most in 28 Years on Profit.”
Another interesting tidbit is that with IP’s recent acquisition of a business asset from Weyerhauser, IP will soon be the world’s largest maker of containerboard and corrugated boxes. Sounds like a decent-sized moat to me.
Turning away from paper and towards lumber, the market blog from the Canadian Globe and Mail asks whether lumber be the next oil? The Canadian blog gives particular attention to Canfor Corp., Canada’s largest (or second-largest by market value) lumber producer.
Canfor’s stock has fallen over 40% in the last 12 months, yet Canfor’s CEO Jimmy Pattison has been purchasing shares and has increased his stake in the company to nearly 30%. The fact that Pattison is aligning his interests with the company is a great sign. Pattison also seems to have a history as an activist investor. Two other catalysts for a recovery of Canfor’s stock is a falling Canadian dollar or a recovery of the U.S. housing market.
Things still look pretty bad for Canfor, and most likely other lumber companies as well. A recovery can be imagined, but is not in clear view. But aren’t the bad times the best times for a value investor?
Two activists that specialize in closed-end fund investment have recently filed 13Ds. The 13D filing is a statement of acquisition of beneficial ownership. According to the SEC, “When a person or group of persons acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934, they are required to file a Schedule 13D with the SEC.
The activists are Bulldog Investors and Western Investment LLC.
On 7/8/08, Bulldog stated they had 14.64% of the outstanding shares of Morgan Stanley High Yield Fund (MSY). Currently, MSY is trading at an 11.6% discount to NAV.
On 7/22/08, Bulldog stated they had 8.22% of the outstanding shares of Insured Municipal Income Fund (PIF). Currently, PIF is trading at an 8.5% discount to NAV.
On 7/8/08, Western Investment stated they had approximately 9% of the outstanding shares of DWS Global Commodities Stock Fund (GCS). Currently, GCS is trading at a 13.6% discount to NAV.
