Now That’s What I Call “March Madness”: The Commodities Sector’s Two-Week Rollercoaster Ride
March 31, 2008
Smart Profits Report: Commodities Corner
Monday, March 31, 2008
by Lee Lowell, Futures Options & Commodities Specialist, Smart Profits Report
From boom to breakdown in just two weeks!
If ever there was a great example of how volatile the commodities markets can be, and how fast they can move, the last two weeks just proved it.
Last time I wrote to you (March 17), most of the major commodities markets were booming and hitting all-time highs. But in just 14 days, we’ve seen a massive capitulation and sell-offs in those same markets.
Let’s take a look at some of the movers and shakers and see if we can figure out where things are headed from here…
The Crude Rollercoaster Continues
Take crude oil, for example. Perhaps in homage to St. Patrick’s Day, oil prices spent most of the time wallowing in green figures, as the price per barrel jumped to all-time highs around $111.
But in just three trading sessions, it endured a nasty $12 selloff. In dollar investment terms, that’s $12,000 per single contract alone!
But oil being the volatile commodity it is, the price came roaring back last week and recouped most of its losses, as it hit $108, before selling off once again to its current price around $100.65 a barrel. As I write this, that’s a loss that’s a loss of almost $5 a barrel in today’s session.
As you may know, I believe www.futuresource.com is one of the best websites for commodities prices and news - and you can graphically see oil’s recent volatility on this daily chart of oil futures.
With so many hedge funds and speculators in the oil market, it’s likely that they’ve been busily adjusting their positions to coincide with the end of the first quarter today. And there’s no reason to think the current volatility will end anytime soon.
Anything Oil Can Do, Gas Can Do Better
Natural gas is another big energy sector mover. And while oil grabs the bulk of the headlines, this market is even more spectacular.
For example, the front-month natural gas futures contract topped out at $10.365 per mmbtu two weeks ago. But within a few trading sessions, it got hammered back down to the $8.750/mmbtu level - a massive move of $16,000 per contract. Imagine if you were playing with 100 contracts…
And not to be upstaged by crude oil, natural gas also came roaring back just as fast. It has since regained a major portion of the selloff to its current level of $10.12/mmbtu. That’s another move of over $13,500 per contract. You can see these moves on this chart.
If you’re going to get involved in the energy market, make sure you stick with limited-risk option strategies like credit spreads. It will do wonders for your psyche!
Metals Lose Their Mojo
The metals market has also taken a few hard punches on the chin recently. In just a few trading sessions last week, gold and silver gave back all the gains they’d notched over the last month.
Specifically, gold managed to give up about $130 an ounce, silver got blasted for about $4.50 an ounce. At a glance, you can see that those are both big losses. But most media outlets never actually tell you what that means in dollar terms. So here you g A $13,000 dollar value per contract on gold and a staggering $20,000 per contract on silver.
Check out the gold chart here and silver chart here.
Hedge Funds Hold The Key
Many onlookers might hear about these tremendous upward and downward moves in the major commodities and wonder exactly why it’s happening. You can sum up most of it in just two simple words: Hedge funds.
I mentioned in my last update here two weeks ago that rampant hedge fund speculation is the main driver of such huge swings in price. And you can tie it to events in the stock market.
As you know, stocks have endured a miserable first quarter. Investors have barely been able to get a handle on their positions before the market lurches from one slump to the next. But as this news flashes across the television and Internet, remember that there are always folks looking to profit from it.
Cue the speculative hedge funds, eager to make some quick n’ easy money, as they withdrew their cash from the stock market and piled it into commodities instead.
Now, though, as the Federal Reserve rides to Wall Street’s rescue, slashing interest rates and assisting with the Bear Stearns bailout, stocks have recently enjoyed a bit of a brighter spell. And once again, the hedge funds are seeking to capitalize, yanking their money from those same commodities positions (at least for now).
Now, onto some “soft stuff”…
“Soft” Prices In A “Soft” Market
From buying fever to selling frenzy, the “soft” commodities have also endured their share of volatility. Just take a look at coffee, sugar, cocoa, orange juice and cotton and you can see the relentless selling over the past two weeks.
This isn’t something most folks think about while they’re downing their morning cup of java, but on a pure dollar basis, coffee has given up the most gains. As you can see on this chart, the price has sunk from $1.72 per pound all the way down to $1.26 per pound - a loss of $17,250 per coffee futures contract.
But it wasn’t alone. Sugar, cocoa & cotton have also given up sizable gains, with cotton giving up the most on a dollar basis at $12,000 per contract, as you can see here.
The Safest Way To Invest In The Commodities Sector Right Now
Two weeks ago, commodities were roaring ahead and few people saw such a major drop in such a short amount of time. But having done so, some of these markets may be approaching oversold levels, perhaps even heading down to support levels, where you could play a rebound with some small, bullish strategies.
If you feel like dipping into the commodities sector, remember that it can be a dangerous area for rookies who don’t know what they’re doing. As you’ve seen from the recent huge moves, you wouldn’t want to get tripped up and see your portfolio gets ripped to shreds.
You can mitigate this risk by sticking with limited-risk option strategies. And if you really want to cash in on these moves, you can always let me do the hard work for you and give you specific recommendations. That’s exactly what I do for my Triple-Zone Profit Trader subscribers on a regular basis.
For more details on that, plus how you can get your hands on my book - Get Rich With Options: Four Winning Strategies Straight From The Exchange Floor - check out my bio on the Smart Profits Report website.
I’ll catch you again here in two weeks.
Lee
Sphere: Related ContentFive-Step Alternate Investment Strategy
March 25, 2008
Help Yourself To “Hedge Fund-Style” Investing With This Powerful,
Five-Step Alternate Investment Strategy
Tuesday, March 25, 2008
The Smart Profits Report Issue #508
by Marc Lichtenfeld, Senior Analyst, Smart Profits Report
When it comes to healthcare investing, I’ve found that my five-step alternate investment strategy is the only way to uncover the best stocks; and I call it the F.I.R.S.T. strategy.
I use this investment strategy with my personal investments as well as those I recommend for The Xcelerated Profits Report so I was sweating as I read a recent press release on SinuNase?.
“SinuNase? achieved, as anticipated, superior resolution of the cardinal symptoms of chronic sinusitis (CS), as compared to placebo control arm…”
Oh, man. The drug worked better than placebo. My heart was pounding. I detest missed opportunities - and hate to think that my abundance of caution may have steered subscribers away from a stock that was about to double or triple overnight.
But there was more. And it proved that when it comes to investing in the healthcare sector, it pays to use a well thought out investment strategy. And in this case, the carnage that was about to ensue provided graphic evidence to support this…
How The F.I.R.S.T. Investment Strategy Alerted me of 26 Deadly Words
As the press release continued, 26 critical words immediately put me at ease: “The analysis of the unblinded primary endpoint data did not show the required level of statistical significance when comparing the SinuNase arm to the control arm.”
Bottom line: The drug did work better than placebo, but didn’t meet the goals of the pivotal phase III trial. The drug was a failure and the stock would implode in the morning.
While I certainly wasn’t overjoyed at the news, because I knew people that were in the stock, I must admit to feeling relief that my proprietary F.I.R.S.T. methodology had paid off and led me to the right conclusion.
Five Steps To Strategic Investing
As you may know by now, my specialized area of investing is in the healthcare sector. And F.I.R.S.T. is an acronym for a five-step strategy that I use to separate the potential blockbusters from the flameouts. When researching, my process includes digging into…
Financials: I start by examining a company’s financials. Does it have enough capital to continue its research and development, market and commercialize a product, or simply to continue everyday operations? I also want to see what the financial picture will look like in a few years. What’s the competition like (now and in the future)? What percentage of market share is it likely to capture?
Interviews: Like many things in life, investing in healthcare isn’t just about what you know. Who you know can be just as important. Having focused on the healthcare sector for many years, I’ve built up a pretty strong network of top contacts in the industry. So I Interview vital resources like top company executives, institutional shareholders, vendors, production workers, etc.
Research: You can never do enough. I look at scientific papers, medical journals, industry statistics, opinion pieces, blogs - anything that will shed more light on a product and the disease or condition that it treats.
Safety: The Safety of a drug is obviously critical. The Food & Drug Administration (FDA) has shut down many effective drugs because of side-effects or adverse events. In the wake of several high profile failures, the FDA is much more conservative today, so it’s more important than ever to prowl for any sign of safety concerns. If there’s even a hint that the FDA may sniff around an issue, we’ll pass on the stock.
Timing: Once we get to the point where the company has satisfied the first four criteria, there needs to be a catalyst that will move the stock. Perhaps the company will release some clinical data soon, or a new product launch is expected. You don’t want your money to just sit idly for years. You need a reason to get in now.
And I was certainly glad to have applied the F.I.R.S.T. investment strategy to the company I mentioned a moment ago…
How A Fat Financing Deal Squashed My Investing Interest
Last year, an acquaintance of mine - a stock market professional for years - introduced me to Accentia Biopharmaceuticals (Nasdaq: ABPI). It’s a small biotech company that has a novel approach of treating chronic sinusitis. I was intrigued and dove into the story - using the F.I.R.S.T. methodology, of course.
- F: The financials looked fine, at least for an early stage biotech company.
- I: Having interviewed company executives and industry insiders, I came away impressed.
- R: My research showed that the market for chronic sinusitis was huge. If the drug worked, it would likely  dominate the market for this condition.
- S: I was satisfied with the safety data.
- T: And with phase III results expected early this year, the timing couldn’t be better.
But one thing nagged at me. On pages 75 and 76 of the company’s 10-K, filed with the SEC, details of Accentia’s credit facility were discussed. The financing arrangement seemed quite expensive to me.
Considering that the money came from an investor and not a bank, I thought that a bullish investor would be more accommodating in order to participate in the upside. However, Accentia had to pay a high interest rate on the money, as well as issue warrants to the investor.
This didn’t feel right to me. I mean, if this was the next great drug and biotech company, why was the financing deal so expensive? Sure, small-cap biotech is inherently risky, but this credit facility implied there was more risk than usual. I called some contacts and spoke with management, but none of their answers alleviated my concern.
“F.I.R.S.T.” Class, Institution-Style Research
I say all this because after weeks of research, I planned to recommend the stock in our premium investment newsletter - the Xcelerated Profits Report. But ultimately, I passed. Although almost everything lined up in favor of a buy recommendation, almost is not good enough for me.
And take a look at ABPI’s performance. From a close of $2.99 on March 24, 2008, investors crushed it on the bad news and it plunged almost 70% to less than $1 in one day. This definitely highlights the benefits of the F.I.R.S.T investment strategy and just goes to show that there’s no substitute for rolling up your sleeves and digging into the hard work when investing - particularly in the healthcare sector.
This is the exact investment strategy used to chalk up the 99% win on the first half of one recommendation for XPR members late last year (and we’re up 97% on the second half right now).
And it’s the investment strategy that forms the bedrock of a new product I just launched that will allow you to tap into institution-quality research called the Access Research Group; the exact same kind that I used to write for some of the largest, multimillion-dollar hedge funds in the world (and which they used to pay my company millions of dollars each year).
Until next time… hoping your longs go up and your shorts go down.
Marc Lichtenfeld
Healthcare Investments: 5 Steps To Investing In Healthcare During A Bad Economy
The Healthcare Sector: Recession-Proof Your Portfolio With This Robust Sector
Investment Research: How To Avoid Getting Burned By The Analyst & Banker Tag-Team
Sphere: Related ContentCapitalize On Bear Stearns and JP Morgan
March 24, 2008
“Sector Watch”: While The Market Agonizes Over Bear, Here Are Two Stocks That Could Capitalize
by Jim Stanton
Technical & Quantitative Analyst, Smart Profits Report
Recovered yet?
No, I’m not talking about this weekend’s college basketball “March Madness” (although some of the results did live up to the “madness” tag perfectly, leaving many brackets in tatters).
I’m talking about the stock market madness in the wake of the Bear Stearns (NYSE: BSC) fallout. It’s just a week now since BSC shares did their best impression of the Titanic, sinking all the way down to $2 a share - an astonishing slump from the $80-85 level seen at the end of February.
As you know by now, JP Morgan (NYSE: JPM) collaborated with the Federal Reserve and arranged a buyout deal for $2 a share to prevent Bear from collapsing altogether.
As my colleague Karim Rahemtulla wrote here last Thursday, while the government-assisted bailout didn’t play too well with folks who thought the company should have just been left to fail like any other firm, this was a necessary bailout in order to prevent a catastrophic worldwide meltdown.
As it was, the deal was struck over the weekend, before the Asian markets opened on Sunday night, to ward off widespread panic. And it worked.
Of course, BSC soared today on news that JP Morgan has upped its purchase offer to a more reasonable $10 a share in order to placate angry Bear shareholders who think JPM grossly undervalued the company.
The news has obviously dominated the financial headlines over the past week, so before I move onto my top bullish and bearish ETFs for this week, let’s take a closer look at how this is affecting the broader market to see if we can pick up some clues…
Sell! No, Wait… Buy!
As the Bear news hit the wires, the initial reaction among investors was a mass selloff, which pushed the S&P 500 briefly below its January low. However, once the dust settled and the Fed slashed interest rates again last week, the indexes reversed course and heading higher. By the end of last week, the S&P 500 had traded above the previous week’s high.
Here’s what I wrote in the inaugural edition of “Sector Watch” two weeks ago:
“Since setting their lows in late January, the stock indexes have traced out a sideways consolidation pattern that could last a while longer. While the Dow Industrials and S&P 500 have held up slightly better than the Nasdaq indexes, they all have similar chart patterns. After last Friday’s big selloff, it looks like a test, or break, of the January lows is in the cards.”
The Nasdaq indexes had already taken out their January lows in the first week of March but on the Bear Stearns announcement, the S&P 500 did indeed make new correction lows before it reversed higher. The Dow Industrials fell short of doing the same by less than 100 points.
The Trouble With Consolidation
This is typical action within a consolidation pattern (i.e. a trading range) - within which the indexes have traded stubbornly for about two months now.
It’s notoriously difficult to forecast the price action within these patterns, or how long the patterns will last but, after last week’s showing, it tells us that the Dow and S&P 500 were not ready to break down yet and were just testing their January lows.
From here, the consolidation pattern could drag on a while longer - and this one looks bearish. However, the Fed’s intervention with Bear Stearns may have speeded up the correction process. Now it’s up to the indexes to either trigger new buy signals, or break back down once the next resistance levels are reached.
This does not mean that the indexes do not have to reach their downside targets. But sometimes, surprise news like this can effect the chart patterns, so it’s possible that the bailout could have created an important low.
Even if the indexes are still in a bearish consolidation pattern, there’s a good chance that they could test the February highs before the selling resumes.
Okay, let’s dig into a couple of market sectors for some more specific opportunities…
Hi-Ho, Silver
Looking for a bargain-basement opportunity in a truly beaten-down sector? Try homebuilder stocks, or financials.
These two have endured the most pain over the past few months, but both some relative strength last week, despite the Bear Stearns fiasco. They might have some additional upside over the near-term, but in a volatile market like this one, I’d shorten my time horizon to days, not weeks.
For a lower risk buying opportunity, take a look at the silver market.
Last week saw plenty of liquidation in the commodity markets, due in part to highly leveraged funds needing to raise capital. As you’d expect, both gold and silver spiked to new highs on the Bear Stearns news, but quickly reversed lower because the funds needed the capital to stave off margin calls in other areas.
It’s possible that the bull market in precious metals has ended, but since almost all the other commodities also got hammered last week, the selling appears to be a case of forced liquidation rather than for fundamental reasons.
Either way, the iShares Silver Trust (AMEX: SLV) is approaching critical support levels and may be setting up a low risk buying opportunity.
As you can see, the stock closed at $167.01 last week and is quickly heading back down to one of its previous highs at $157.20. In addition, that’s close to the 50% retracement level ($158.49) of its move up since last August, and to an uptrend line, drawn off the August 2007 lows.
Since all the support levels come in around the same area, it should present a low-risk buying opportunity if SLV stabilizes around $155 to $160.
Grab Some Green From This Green Fund
After running some technicals through my ETF list, I noticed that many of them are oversold. When this is the case, the prudent course of action is to wait for a rebound to short an ETF that has a bearish chart pattern.
That’s the scenario we have with PowerShares Wilderhill Clean Energy (AMEX: PBW). The stock has a bearish chart pattern, recently tested its January lows, and appears oversold in the near-term. It should make new lows before a meaningful reversal can take place.
Even with the surge in oil prices this year, PBW has endured a surprising slump (with oil prices high, one would expect alternative energy resources to gain in popularity) - and doesn’t show much sign of rebounding anytime soon.
The stock should eventually trade below $17, but the question is: Where to short it? The smart play is to wait for PBW to bounce up to some sort of meaningful resistance level, which greatly reduces your risk. If that occurs, watch the 50-day or 200-day moving averages. A test of the February high at $23 is a possibility, so a move back up to the $21 to $23 area would be a good, low-risk entry point.
That’s all for this edition. Catch you again in two weeks.
Jim Stanton
Sphere: Related ContentOil And Gold Grab The Headlines… But Silver’s Another Major Mover
March 17, 2008
Smart Profits Report: Commodities Corner
March 17, 2008
By Lee Lowell
Futures Options & Commodities Specialist, Smart Profits Report
Editor’s Note:Â Last Monday, we kicked off Part I of a new Smart Profits Report feature - “Sector Watch” by our technical analyst, Jim Stanton. This week, we bring you Part II, with commodities expert Lee Lowell taking his turn in the rotation. With oil prices having hit $111 a barrel and gold over $1,000 an ounce, commodities are once again taking center stage, as many investors look to diversify and gain some relief from a damaging stock market. As a former pit trader and market maker at the NYMEX, Lee is a true insider - and better qualified than most to know the real forces moving these markets and show you the next moves. So without further ado, here’s Lee’s analysis of oil, gold - and one other market not receiving as much attention, but also making huge moves. Enjoy.
The Runaway Train That Is The Commodities Sector
With oil prices blasting past $111 a barrel last week (the price has since dropped over $4 today, back to around $106) and gold prices finally breaching the important $1,000 an ounce level, the commodities sector is still barreling along relentlessly.
So as our resident commodities guy, it would be remiss of me to not give you some analysis and guidance on these crucial markets that can not only move the commodities world, but also spill over and affect your stock positions, too.
While most of the media love to talk about oil and gold ad nauseum, the truth is that it’s not just those two products that are surging higher. Several other commodities are enjoying bullish runs. For example, wheat prices just hit an all-time high of $13 a bushel - almost twice as high as the previous high of $7, set 12 years ago.
While massive moves like this garner plenty of press attention and dinner party conversation, many investors don’t actually know that you can make some serious money from commodities - and in my experience at the NYMEX, often more money than from the stock market. So let me show you how and where the money is being made…
$111… And Rising
Without doubt, the crude oil market is grabbing most of the headlines at the moment. Having hit $111 per barrel last week, this is now the highest price ever paid for a “front-month” futures contract (i.e. one that trades just one month ahead, the closest to the current date).
Not only is crude making new highs almost daily, it’s also experiencing some extremely large intraday price swings. While oil used to trade relatively calmly during any given trading day, it’s now commonplace to see $4 a barrel swings from high to low during the day - just like we saw today. Such volatility can make or break traders, which in turn leads to more volatility. Here’s the current daily chart.
As you can see, oil prices have shot from $85 a barrel to $110 in just six weeks. While the media likes to talk merely about the price-per-barrel gain, in investor dollar and profit terms, that’s actually a $25,000 move on just one futures contract.
And it’s not just the obvious factors driving the price forward. Sure, we’re always likely to have some kind of turmoil in the Middle East (or at least potential for turmoil, which can keep prices high, too). But this has been known and priced in for some time now.
Instead, one of the main price drivers over the past year or so is not geopolitical issues, but intense hedge fund speculation. With the stock market getting hit hard, due to a myriad of well-documented problems in real estate, the falling dollar, declining GDP growth and others, the massive hedge funds are pouring their money into areas like commodities - and oil is one of the biggest benefactors of the capital influx. Going forward, we’ll certainly see volatile dips along the way, but for now, expect this market to keep going up.
If you don’t want to invest in the sector directly, through future options contracts, you can always gain simple exposure through a couple of the most liquid ETFs - the largest one - U.S. Oil Fund ETF (AMEX: USO), or the Energy Select Sector SPDR (AMEX: XLE), which invests in some of the biggest firms in the oil and oil services sector.
Metals On The Move… And This One Is Dishing Better Returns Than Gold
When it comes to the metals market, most of the media and financial outlets are focusing on gold. Hardly surprising, since the metal just whizzed by $1,000 an ounce.
But while gold dominates the headlines, the truth is that most of the sector is enjoying incredible strength. Take silver, for example - a market not getting much press, but which is also setting new all-time highs over $21 an ounce. In fact, the silver market has actually given a better return on investment in a very short timeframe - as you can see on the chart.
Since the middle of December 2007 to today, silver has moved from $14 an ounce to its current level of $21 an ounce. That represents a dollar value $28,000 on just one futures contract.
But what’s so striking is that $3 of that move has occurred in just the last three weeks alone. That’s a $15,000 move. Keep an eye on the metals market, as there seems to be nothing holding it back from going higher.
The Ultimate Market Shift From Unforgiving Stocks To Lucrative Commodities
From talking with many of the colleagues I still have on the trading floors, most of the extreme moves in the various commodities have happened because of the trading activity from large, speculative commodity funds.
As the stock market has tumbled, these funds have moved away from equities and tossed their money at what they believe to be “undervalued” commodities instead. And while it’s hard to say whether these commodities are indeed undervalued, when the ball gets rolling, it’s hard to stop it until everyone decides to get out at the same time.
That’s all for now for this column. But if you’re interested in more analysis, I’ve covered two more commodities - one in the grains sector and another in the “soft” commodities area - in the April Xcelerated Profits Report issue, which will be sent to subscribers later this week. If you’re not one of them, click here to get more details on how to take your investing to a professional level by implementing the same strategies that the pros use every day to build wealth quickly and safely.
I’ll catch you here again in two weeks. Stay tuned for Jim’s “Sector Watch” column again next Monday.
Lee Lowell
Sphere: Related ContentWhy The Bear Stearns Buyout Was Necessary
March 14, 2008
And How You Can Profit Amid Fear-Mongering And Financial Trash Talk
Smart Profits Report Issue #507
By Karim Rahemtulla
Investment Director, Smart Profits Report
It hasn’t taken long for some rogue to capitalize on the Bear Stearns (NYSE: BSC) collapse… but I have to admit, it’s pretty clever.
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I found a new dictionary definition today: To be “Bear Stearned.” Meaning: To mess up, fail miserably, or collapse. As in: “Wow, I really bear stearned that test.”
But don’t get the Oxford’s English Dictionary folks on the line just yet. This obviously isn’t official.
Joking aside, the Bear fallout reminds us of a critical driving force within the stock market. We’ve talked about it here before: The fear factor - and how to use it to your advantage.
In Bear Stearn’s case, the fear was absolutely warranted, as investors piled out of the stock en masse on news that JP Morgan (NYSE: JPM) had swooped in to gobble up the company for a mere $2 per share. At that point, it didn’t matter whether they thought Bear Stearns should be left to fail… they just wanted out. And fast.
While some saved money, the ripple effect led many others to bail out of their other positions in fear. Make no mistake… financial catastrophe was truly on the doorstep. Thankfully, it’s been averted for now - and hopefully forever.
But let’s examine what would have happened had the government not stepped in…
“Laissez-Faire” Has Powerful Proponents… But Doing Nothing
When it comes to the free markets, many people are “laissez-faire” thinkers. That is, they let the market solve its own problems, rather than external sources interfering with it.
In theory, this is an admirable philosophy. In practice, however, it can be a one-way ticket to catastrophe - particularly today. You see, those economists of yesteryear weren’t confronted with 30-to-1 leverage, derivatives on derivatives, crooked bankers, lax rating agencies and malicious investors. So while the theory might make for good reading, it’s often harder to put into practice.
But what if there hadn’t been a Bear Stearns bailout?
The Bear Stearns Alternate Ending
If Bear Stearns had just been left to fail outright, with no Fed-fueled rescue plan (as some think it should have), the stock market would have been absolutely battered this past Monday.
Imagine the scene at other investment banks, which would have collapsed under debt obligations that were not met and other agreements made with other banks were not met either.
Here’s how this scenario would have played out:
- The financial markets would have seized.Â
- Your bank would have closed its doors.Â
- The FDIC would not have the capital to cover all the assets in a nationwide bank run.Â
- The government would have instituted capital controls.Â
- Gold would have raced to $2,000 per ounce…but you would not be able to buy or sell it, since market trading would have been suspended.Â
- The government would have no choice but to turn on the printing presses to unprecedented levels causing a massive devaluation in the U.S. dollar. In turn, this would have led to a total collapse of emerging markets and the currencies of those countries.Â
- Even developed markets like the G7 would have also seen a collapse in their markets and currencies.Â
- Your house would be worthless, your business would be worthless, and your assets would be frozen and devalued every hour.
Think I’m exaggerating? This is not some sensational fantasy. It actually happened 10 years ago when the Asian markets collapsed. I was there at the time and saw the carnage at first-hand.
The only difference was that those markets weren’t worth much to begin with. But the U.S. market, its assets and the financial system is worth in excess of $50 trillion.
The Bear Bailout Was An Unpopular Decision… But An Essential One
So while we might not like the fact that the government bailed Bear Stearns out of the mess (to a certain extent), when that would never be the case with 99% of other businesses, it was an absolutely necessary step. After all, do you really think that the impact of a financial collapse like the one I laid out above would be limited to one country or one market? Not a chance.
This is one case when “laissez-faire” economics would have caused Armageddon. Without a backstop, we’d be left to the devices of people. And I don’t know about you, but there are certain people whose devices I wouldn’t want impacting my financial well-being!
Beware The Armageddonists
The folks who think that it’s okay for a financial system to collapse are the people who should scare you. They “think” that they know the outcome for every crisis and it’s that hubris that allows them to celebrate each time the markets or the dollar takes a tumble.
But here’s the problem: Some crises are irreversible and all the profits they intended to make will evaporate just as quickly as the underlying markets that they enjoyed undermining. Investing is usually a zero-sum game, but financial Armageddon is not.
There are hedge funds, investment banks, investors and plain old regular folks who crow victory every time the markets decline. That crowing gets even louder as we head toward catastrophe. Rumor mongering, financial trash-talking and outright selling and buying of targeted securities are all meant to produce one result: Fear in the marketplace.
While Everyone Else Just Runs Away, Here’s How To Run Away With Profits
In Bear Stearns’s case, that fear was totally warranted. But on many other occasions, it’s not - and it’s a smarter move to take the contrarian approach. Don’t get me wrong… it’s not always easy to do the opposite of what everyone else is doing. It takes real courage in your convictions.
But as we’ve said here before, a mass selloff can present some great opportunities to buy quality stocks at bargain prices. I’ve done this with the financial sector in our Xcelerated Profits Report newsletter - and have just done it again with a fast-growing, small-cap defense sector firm in the April issue, set to hit subscribers’ inboxes on Monday. And thanks to the small-cap sector woes over the past few months, we’ll be able to buy it for about a $6 discount. For more information on how you can get this pick - and all our others - visit this link.
Have a great weekend,
Karim
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March 12, 2008
Risk-Reward Ratio At Work
Smart Profits Report Issue #506
By Marc Lichtenfeld
Senior Analyst, Smart Profits Report
In a volatile market like this one, it’s easy for risk, fear, and nerves to take over. While nobody wants downers like that to interrupt their positive emotions and pleasant daydreams, one of the most overlooked aspects of investing is risk - specifically the risk-reward ratio.
So let’s take a look at how you can strike a balance between risk and reward, and maintain your sanity in a market that is almost certifiably insane…
Today’s column is to reinforce investing lessons I learned long ago and give you a training session on the importance of the risk-reward factor. As the following examples show, it’s a pretty powerful lesson…
This Bear Didn’t Just Get Tranquilized… It Was Euthanized
Let’s deal with a very topical example first - the one that had the financial world in a spin on Monday.
As you know by now, Bear Stearns (NYSE: BSC) has collapsed. Having assured the public that everything was okay and it would survive its catastrophic errors, the you-know-what really hit the fan last Friday and into the weekend.
Having traded around $160 a year ago, JP Morgan (NYSE: JPM), with the help of the federal government (who fast-tracked the deal), swooped in to buy the firm for just $2 on Sunday - a 93% discount to its $30 closing price last Friday.
As the stock was plummeting at the end of last week, I looked at selling some out-of-the-money puts. With the stock trading around $35, I considered selling the July 2008 $20 puts. Since BSC had traded in the $70s just a week before, and the Fed wasn’t going to allow the company to fail, it was reasonable that the stock would never see $20 and the premium for selling the puts would be free money.
But as I do with every investment, I thought about the risk if I was wrong. And in Bear’s case, it required extra attention. While I have a pretty good feel of where a stock will head if things turn sour, the truth is that with Bear, I didn’t have a clue. While I thought I was right, I steered clear because I didn’t have a firm grasp of what would happen if I wasn’t.
This reinforces the need to use sell-stops or put options in order to manage losses or protect profits (more on this in a moment). After all, when Bear Stearns was trading in the triple-digits, no one in their wildest dreams could have envisioned this past weekend’s events.
The Right Risk-Reward Helped Avoid This 88% Bomb
Take a look at this chart, showing the last 10 days trading of Keryx Biopharmaceuticals (Nasdaq: KERX). Ouch! That huge 88% drop last week was because of a failed Phase III clinical trial.
I’ve been tracking KERX for a couple of years now. I actually went to school with the CEO and we get together whenever we’re at the same conference. In addition to being a good guy, he’s smart and capable. I’m always very impressed with his presentations to investors.
The early efficacy and safety data on the company’s lead drug, Sulonex, looked compelling. The drug treats diabetic kidney disease and having done some work on the stock, I expected shares to double if the trial data was positive. Subsequent FDA approval would have likely led to further gains.
However, if the data were not positive (as it turned out), the shares would get crushed. The company has a few other drugs in the pipeline, but the KERX story was all about Sulonex.
While I wanted to support my friend, I felt the risk was just too high versus the reward that I expected if I was right. I needed more than a double to offset that much risk.
This risk-reward factor is crucial when making wise investment decisions.
A Suggested Risk-Reward Ratio To Use
When you’re investing, you know you’re going to suffer some losses from time to time. It’s inevitable. But if you’re only grabbing small profits along the way, you’re not being amply rewarded for the amount of risk you’re taking on.
If you don’t want to get stuck in that position, employ this guide that active traders use in order to make a trade worthwhile: A 3:1 ratio of perceived reward to risk. In other words, if an investor is planning to risk $1, he won’t enter the trade unless he believes he can make $3.
Stops And Puts… The Best Way To Clip Risk Without Sacrificing Reward
In our Xcelerated Profits Report investment newsletter, we usually recommend employing a 25% stop-loss on positions. This gives our stocks room to move in a volatile market, but without suffering catastrophic losses if they go against us. That said, we’re not aiming for 10% or even 20% gains… we’re looking for stocks that have potential to grow substantially.
For example, one of my current recommendations is a small biotech company involved in the development of a novel Alzheimer’s treatment. If the drug is as safe and effective as early clinical data indicates, we could have a big winner on our hands.
But what if the risk-reward ratio is negative?
In this case, we’re protected because we bought put options in order to limit our losses. So we still keep the enormous upside, but have used a sophisticated strategy in place to cap our risk.
Why put options and not a stop-loss? In cases like this, a sell-stop doesn’t work as well, because the stocks gap open lower than the stop loss. You’d still sell your position, but at a much lower price than your stop loss.
And if puts had not been available, we wouldn’t have chased after the company, because as you saw with Keryx, negative news could sink the stock. If you’re at all interested, I recommend getting all the details on the position - and the professional way we’re playing it.
So do you want the perfect example of a top-notch risk-reward ratio?
A Weekend Launch
This weekend is a big one for me. I’m launching a brand-new investment service, dedicated to finding the best stocks, based on my five-point F.I.R.S.T. system. As a healthcare specialist, I’m going to be hunting down the best stocks within the sector and judging them on Financials, Interviews (with company executives and other healthcare experts), Research, Safety, and Timing (hence the F.I.R.S.T. acronym).
I’ve already identified a tiny medical device company, currently trading under $5, which could trade north of $100 in a few years. Furthermore, I believe the risk is lower than most healthcare stocks because there doesn’t appear to be any safety issues, as the device is non-invasive. That’s the kind of risk-reward I like. Stay tuned for more details here very shortly.
Bottom line: Investing is all about risk and reward. Be sure you understand both before you pull the trigger and your returns should improve significantly.
Marc Lichtenfeld
Healthcare Investments: 5 Steps to Investing in Healthcare During a Bad Economy
Risk Management and Position Sizing: Three Ways To Give Your Trades A Tune-Up
Financial Risk Management: Know Your Risk Tolerance Before You Trade
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Sphere: Related ContentFollow These Simple Anti-Recession Tips
March 10, 2008
Don’t Fear “The Ides Of March”… Just Follow These Simple Anti-Recession Tips
Smart Profits Report Issue #505
By Martin Denholm
Managing Editor, Smart Profits Report
“Beware the Ides of March.”
So said a wise soothsayer to Julius Caesar in the famous Shakespeare play, warning him of impending doom. Caesar scoffed at him - and of course lived to regret it when he paid the ultimate price.
Fortunately, March 15 (the Ides day itself) falls on Saturday this year, so there’s no chance of any market madness on that specific day. But there are still plenty of modern-day financial soothsayers warning investors about all kinds of perils. One prime example: The constant chatter about whether or not the U.S. economy has slipped into a recession.
So let’s first poke some fun at these folks, then I’ll show you how it doesn’t matter if we’re in a recession, as long as you know how to profit from it.
Two Reports Arguing Recession
As the Federal Reserve was busy pumping another $200 billion into the financial markets, two other groups were proudly releasing their latest research.
A Bloomberg survey of 62 economists concludes that the current economic downturn will be worse than previously forecast and the recovery will be slower and weaker. Specifically, they forecast a measly 0.3% annualized GDP growth rate from January-June (0.1% during Q1 and 0.5% during Q2) - 0.5% less than they projected just last month. How times change, eh?
With consumer prices set to rise by 2.6% this year, consumer spending (which accounts for two-thirds of GDP growth) is only expected to rise at a 0.5% annual rate during the first quarter - the weakest since 1991. With that poor start, full-year GDP growth is expected to hit just 1.4% - the lowest since 2001 - and the group pegs the chance of a recession in the next 12 months at 50%.
Next up, the quarterly UCLA Anderson Forecast. While noting that the credit crisis, a slumping real estate market, weaker job growth, and inflation is stifling consumer spending, the group takes a more contrarian view to the consensus and doesn’t see an official recession. It projects 1.5% GDP growth this year.
If you’re wondering what this means and how it affects you, I have a simple answer…
Don’t Be Scared Of The Big, Bad Recession.
While some folks obviously think it’s fun to predict recessions, it doesn’t actually mean much for investors.
“But, wait… everyone is talking about it. That must mean it’s important, right?”
Not really. Recessions are a normal part of most economies and it doesn’t mean the sky is falling. In the U.S., a recession is generally categorized as two consecutive quarters of declining GDP growth.
And contrary to the doom-and-gloom merchants, it certainly doesn’t mean you should hit the “Sell” button. For example, the U.S. economy has endured 11 recessions since 1945 (this means they were called by the National Bureau of Economic Research - the only group that officially declares recessions). But the stock market actually went up during seven of them, according to the Hulbert Financial Digest.
Remember, recessions can often occur because of particular weakness in one or two sectors, not everything. For example, in 2001, tech stocks led the way down. This time around, you could point the finger at real estate or financials. But it’s still possible to stay invested and make money. Here are a few simple pointers.
Three Recession-Busting Tips
- “Flight To Quality”: Whenever you hear this term, it’s most often associated with the gold market - a great hedge during economic downturns, high oil prices, a deflated dollar, and high inflation. And hey, presto! We have all four of those scenarios today. Oil prices are setting new records almost daily and just hit $111 a barrel, the dollar set a 12-year low against the Japanese yen, and gold responded by hitting a record high today; finally breaching the key $1,000 an ounce mark. Gold is a solid investment, for sure - and it’s a market that my colleague and commodities guru Lee Lowell will be touching on regularly in his new bi-weekly “Commodities Corner” feature, starting here next Monday. But it’s no surprise to see gold ETFs and many gold stocks hitting new highs at the moment. New highs are bullish and the gold market certainly has some serious momentum right now.
- “Flight To Quality” - Part II: It’s not just gold that holds the “flight to quality” tag. In times like this, it’s wise to consider big companies that have been around for years and have weathered many financial storms. Not only that, they do so strongly because they have sound businesses and plenty of cash. And if they pay dividends and/or are well diversified outside the U.S., even better. Take healthcare, for example. My colleague Marc Lichtenfeld is an expert in the field and has talked here before about its excellent, “recession-proof” nature. It’s simple. No matter what the economy is doing, people will still get sick and still need medication. And that means a ton of repeat business. Check out his column on investing in Healthcare during a bad economy. Speaking of diversifying, if you want to grab a slice of many different international companies in one investment, consider ETFs that invest solely in foreign firms. This includes the SPDR S&P World ex-US ETF (AMEX: GWL), or the Vanguard All-World ex-US ETF (AMEX: VEU), which holds 2,200 stocks in 47 countries. On the other hand, be wary about investing in companies that rely heavily on discretionary consumer spending. I’m talking about companies that specialize in selling expensive “big-ticket” items, certain retailers and restaurants. As consumers feel the pinch and the job market continues to struggle, many will cut back on their spending in these areas.
- Fatten Up: One topic getting an increasing amount of attention these days is a so-called “agri-boom.” With the global population growing, so too is demand for life’s everyday essentials. And in the commodities world, supply and demand is a key driver of prices. Not only are we seeing huge moves for oil, but prices for corn, wheat and barley are also rising - something I talked about here back in December.
If you don’t want to invest in these markets directly, you could play the trend by investing in food producers and food sellers, as they’re being forced to pass on higher prices to consumers. Two of the best to consider: Tyson Foods (NYSE: TSN) and Kraft Foods (NYSE: KFT). Again, make sure you check out Lee Lowell’s new commodities column - he’ll fill you in on the major movers and shakers in the sector and show you where prices are headed next, so you know how to profit.
Take care until next time…
Martin Denholm
Sphere: Related ContentHow To Beat The Fed’s Double-Digit Inflation Crusade
March 8, 2008
Smart Profits Report Issue #503
By Marc Lichtenfeld
Senior Analyst, Smart Profits Report
Inflation hasn’t been much of a problem in the United States since Federal Reserve Chairman Paul Volcker jacked up the Fed Funds rate to 20% in order to combat rising prices.
Unfortunately, the phenomenon is rearing its ugly head again with the Producer Price Index (PPI) rising 7.7% in January. Common sense suggests that with the Fed actually cutting interest rates in order to ward off an economic recession, inflation should continue. The question is: How high will it go?
Well, check out this scary bit of data I received, along with a chart from one of my favorite technical analysts (yes, I’m a geek and have favorite technical analysts)…
A Stark Trend That Points To Double-Digit Inflation
Double-digit inflation is on the way. At least according to John Roque of Natexis Bleichroeder.
Roque points out that since 1947, every time the PPI eclipsed 7%, it didn’t stop until it hit at least 10%. The highest level was 19.5% in 1974. And as you can see from the chart, when inflation climbs above 7%, it tends to stay there for a while. In the late 1970s/early 1980s, the PPI was greater than 7% for more than three-and-a-half years.
Go The Inverse Route With These Four Inflation-Busting Funds
If Roque is correct - and I believe he is - investors need some kind of strategy, or investment vehicles, that will offset the decaying power of inflation on their portfolios.
And that’s what we’re here for. Rather than just report doom and gloom, we want to give you some ways to hedge against higher inflation. So here goes…
Inverse Bond Funds: There are several mutual funds that are inversely correlated to the bond market. You see, while current Fed chairman Ben Bernanke is committed to lowering interest rates, reality will smack him hard if inflation does in fact reach double digits.
He’ll then be forced to raise rates significantly in order to fight continuing price increases. And when rates go up, bonds go down - which is why an inverse bond fund should perform well in that environment. Here are a few to consider:
Rising Rates Opportunity 10 ProFund (RTPIX): Seeks returns that are inverse to the daily movement of the 10-year Treasury note.
Rising Rates Opportunity ProFund (RRPIX): Seeks returns that correspond to 125% of the inverse daily movement of the 30-year Treasury bond.
Rydex Inverse Government Long Bond Strategy (RJYUX): Seeks returns that inversely correspond to the movement of 30-year Treasury bond.
(ProFunds) Access Flex Bear High Yield (AFBIX): Seeks returns that correspond to the inverse performance of the high-yield market.
The World’s Favorite Past-Time: US Dollar Bashing… But Is Relief In Sight?
While it is trendy to bash the U.S. dollar these days and Marc Faber just came out and declared that Bernanke is in the process of “destroying” the dollar through the Fed’s monetary policy, it’s worth keeping one thing in mind…
If inflation continues to rise and Bernanke is forced to hike interest rates, it should help put a floor under the currency.
And should the dollar rise, investors can capitalize in the following ways:
THE FUND ROUTE:
Rydex Strengthening Dollar 2x Strategy (RYSBX): This fund seeks to provide returns that are equal to 200% of the U.S. Dollar Index.
THE ETF ROUTE:
If you’re a dollar bull, you can also go for ETFs (Exchange-Traded Funds). One of the top ones is:
PowerShares DB Dollar Bullish Fund (AMEX: UUP): The ETF is designed to track the performance of the Deutsche Bank U.S. Dollar Futures Index. Of course, you could always short the ETFs of other currencies such as the CurrencyShares Euro Trust (AMEX: FXE).
THE TIPS ROUTE:
If you want to head down a more conservative path, then one option is to own U.S. Treasury Inflation Protected Securities (TIPS). These are securities whose principal is tied to the Consumer Price Index (CPI). Simply put, when inflation rises, so does the principal. The inverse is true as well.
However, at maturity, the investor will receive the original or adjusted principal, whichever is greater. More information on TIPS is available on the U.S. Treasury’s website.
Of course, you don’t have to go down the fund route at all. You can always power up your portfolio by picking great stocks and options, such as the ones recommended in the Xcelerated Profits Report. Our recent 99% winner in BioMarin (Nasdaq: BMRN) would help any portfolio withstand the effects of inflation. Hoping your longs go up and your shorts go down.
Marc
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Fed Interest Rates: Depressed Economy, Inflation Fears & A Weak Dollar Present Problems For Fed
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Sphere: Related ContentOutlook For The US Dollar Is Grim:
March 6, 2008
…But Here’s Why The Dollar Won’t Die
Issue #502
By Karim Rahemtulla, Investment Director, Smart Profits Report
Get out the defibrillator… the US dollar is dying.
You don’t have to look very far these days to find someone sounding the death knell for the dollar. And when you have a Federal Reserve in the middle of a no-holds-barred interest rate-cutting crusade, it’s hardly surprising.
Paper currencies backed by little other than the full faith of the government printing presses will always head in one direction over the long-term. And that direction is down.
It matters little whether you’re talking about the pound, the yen, the euro or the US dollar. Printing presses are not made to sit idle. They are meant to print. And governments are more than happy to spend - and spend mightily.
The net result is that fiat currencies will go lower. But that movement takes time. It doesn’t happen overnight. And along the way, there are many uptrends and downtrends. Some are scarier than others. Right now, we’re in the midst of a scary us dollar downtrend.
There is no end in sight for the weak dollar… or is there?
Three Pretenders To The Dollar’s Crown
Globalization.
You’ve probably heard that term before, centering on how economies have closer relationships than ever and much more impact on each other.
Debate about how there’s a new world order, where the US dollar is no longer king (heck, it’s not even in the royal family as far as some are concerned). Instead the Chinese yuan, the Russian ruble and the Indian rupee are the new and up and coming knights.
But think about this a little bit…
- China: An overpopulated, corrupt regime
- Russia: A benevolent dictatorship
- India: A dysfunctional democracy
Yet all have currencies that are considered more valuable today than the currency of the world’s greatest store of wealth!
I’ve visited China, Russia, and India. Sure, all three countries are growing. But they’re not countries in whose currency I would want to put my faith. The yuan is subject to currency controls, the ruble is controlled by whim, and the rupee is controlled by protectionism.
So how about the pound, euro and yen?
The British Are Coming
As a frequent traveler, I feel the dollar’s fall has taken much more of a toll on folks who don’t travel outside the U.S.
For example, it’s painful to buy a Big Mac meal in London for $9, a Coke for $2 and a candy bar for $1.50. Worse, think about a $5 Coke in Geneva at a nice hotel, or a $100 taxi ride from the airport, or $500 per night to stay in a shoebox in Tokyo.
So to those asking if there is any end in sight, I say there is. And I’ve just provided some examples of why.
If it costs $9.00 dollars for a Big Mac meal in London, and only $5.00 dollars in the U.S., there will ultimately be a reversal of currency flows. People are not stupid. They will ultimately gravitate to buying goods and services of equal quality at the lowest price. Doing otherwise is economic stupidity.
I’m already seeing such a reversal. I live in Central Florida, but if you go to the southern part of my town, it sometimes sounds like England. Both there, and across other parts of the state in general, the British are invading en masse, eager to scoop up cheap Florida real estate, and Big Macs.
A 3-bedroom home in South Orlando, near Disney, an hour from the beach, and with a pool, may set you back $250,000. For a Brit, that equates to about £125,000 - about what it would cost to buy a parking spot in London. It’s not a hard decision.
The same thinking applies to our new friends in the Middle East…
In The Words Of Gordon Gekko… “Greed Is Good. Greed Works”
America needs oil. The Middle East needs US dollars in order to make its oil worth money.
The oilmen can’t afford their best customer falling into a long-term financial crisis. So they buy US dollars. This is no different to the Chinese. They sell massive amounts of goods - it’s what makes their economy tick. But without American buyers - the biggest buyers of worthless knick-knacks - the Chinese economy would not grow at half its current pace. Like the Middle Easterners, they also need to buy US dollars, or risk a major slowdown.
At the end of the day, it really is that simple. Fiat currencies all go to zero sooner or later. But they don’t go to zero in a straight line. Along the way, people from other countries step in when they recognize their own greed as an important part of the equation.
Right now, that greed is what the U.S. Treasury and Federal Reserve is counting on to stem the US dollar’s decline.
Europe cannot afford the euro at current levels, just like Britain can’t afford a strong pound, or Japan afford a strong yen. It’s fine for a little while - but if they want to sell goods to the biggest consumer (the U.S.), they will have to lower their prices. And one way to do that is what the U.S. has done - deflate the currency.
Until next time…
Karim Rahemtulla
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The Weak U.S. Dollar: How To Combat The U.S. Dollar’s Demise Through Global ETFs
Fed Interest Rates: Depressed Economy, Inflation Fears & A Weak Dollar Present Problems For Fed
How To Invest Amid The Subprime Mess, Housing Market, and Consumer Debt
Sphere: Related ContentCapture 13% Dividend Yields in this Ultra-Safe Foreign Country
March 4, 2008
| with the U.S. headed toward a possible recession, and with yields abroad simply beating the pants off of those in the U.S.,it’s a mistake not to look internationally for a solid incomestream. In fact, if you want truly high yields, then you need to look overseas. For example, while U.S. shares pay lessthan 2%, the average stock in many foreign nations is nowyielding 2X or 3X that amount!
It’s a cash-flow desert here in America for anyone who needs tobank a comfortable income off their portfolio. So if you’reone of the millions of Americans currently settling for sluggish 2% yields on U.S. stocks, 3% yields on CDs, 4% yields on government bonds, or pathetic 0.42% yields on savings accounts (that’s right — the current national average sits at less than 0.50%!), then it’s time to start looking elsewhere for higher returns. While most Americans are reluctantly accepting sub-par yields,a select group of savvy, well-informed investors are quietly piling into some of the world’s most attractive dividend-paying stocks — securities with yields of 8%, 10% . . . even 12% or more. But these stocks can’t be found in the U.S. Instead, our research shows that 93% of the world’s highest-yielding stocks are actually located overseas.
In today’s issue, I’m going to introduce you to one of my This large, English-speaking nation is Sound a lot like the United States? It sure does . . . but you’ll be Australia: A Gold Mine for Yield-Hungry Investors
Now is a particularly auspicious time for Australian stocks. The economy is growing robustly — GDP is expected to rise +3.8% in 2008, according to the latest estimates from the International Monetary Fund (IMF). That’s more than double the growth expected from other developed economies like the U.S., Europe and Japan. Unemployment is low — around 4.4% — and inflation seems under control. And as mentioned, Australia is also rich in natural resources — including raw materials such as copper, nickel, and zinc, and agricultural commodities such as wheat — just as the prices of raw materials are enjoying a multi-year boom. With inflation picking up in the U.S. and elsewhere around the world, shares of companies that own or produce agricultural or industrial commodities could be among the world’s top performers in 2008 and beyond.
plus dividend yield) of +10% would actually have delivered an effective total return of +20.9% thanks to the currency boost. I think the Australian dollar will continue to perform well vs. the U.S. dollar, partly because our own greenback is being pushed lower by forces that are unlikely to let up in 2008: a continuing trade imbalance,
Australian companies. I spent weeks poring over financial statements, digging through news articles, and talking to some of my high-level contacts — mutual fund managers and other experts who specialize in the region. In the process, I discovered one of my absolute favorite high-yielders on the planet — an Australian natural gas distributor that serves nearly 1 million customers. Like many operators here in the U.S. and Canada, this company enjoys monopoly control over its extensive pipeline network. And it’s involved in one of the most stable businesses known to man — it charges government-regulated fees in exchange for pumping gas through its network. Thanks in large part to these steady fees, this firm brings in copious cash flows, helping it deliver a 13.0% dividend yield. I also found one of the world’s biggest zinc and lead producers — a great play on the global boom in commodities. Paying a juicy 11.3% yield, this aggressive company is one of the world’s most intriguing mining firms. And thanks to booming commodity prices, its share price should continue to move strongly higher in the coming years.
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Hear It From Our Premium Members...
I sold ½ of the stock per your recommendation, which returned my original investment.
I sold the remaining stock under my regular account on 4/13/2008 for $32.19 and a gain of over $4000.
On May 21, 2008, I sold remaining shares in my IRA account at $39.75 for a gain of over $5,000.
Thanks for your recommendation on this stock."
~R. M. Raga
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