My favorites right now (in order of preference) are:
Big positions*
Google (still the most exciting company in the world and offers the best exposure to the growth of the internet and future growth in computing in high technology such as genetics),
Whole Foods [combines natural, healthy food with indulgence and a somewhat ethical, feel-good culture; It is the best (alternative) grocer in North America].
Next best
Powershares DB Agriculture (offers exposure to corn, wheat, soybeans, and sugar futures.
Apple (exposure to the future of personal computing, net media and gadgetry),
Microsoft (it's still the king of software and will benefit with the growth of the net and computing).
More risky favorites (and thus smaller positions)
China Life Insurance (offers great exposure to the mainland Chinese stock markets),
New Oriental Education (private education company in China),
CDC Corporation (enterprise software, mobile apps, and digital gaming in China),
Shanda Interactive (innovative digital game company in China),
Echelon Corporation (makes power grids more efficient, saving energy and money).
There would be others, but I choose to stay away from heavy industry, mining, pharmaceuticals, biotech, and companies whose business is primarily military contracting. My favorites also preclude companies, sectors, industries, and countries I don't understand well enough.
*With big positions come big risk.
Thursday, May 24, 2007
What Could End The Emerging Markets Bull Run
| by BCA Research: 11:40:00, May 23, 2007 |
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The conditions which have historically ended emerging equity bull markets are an inflation outbreak or debt deflation. Our Emerging Market Strategy service argues that neither are currently present. With regards to inflation, core CPI is either low or falling in the vast majority of emerging economies, despite five strong years of global growth. Rampant productivity gains in the global economic system have resulted in both healthy profit margins and disinflationary pressures. Specifically, falling unit labor costs continue to offset the impact of rising raw material costs and reduce the pressure on the corporate sector to aggressively hike selling prices. China presents a good example. The country is the epicenter of global growth and consequently, it is natural to expect that inflation will first begin creeping up there. Moreover, monetary conditions in China are extremely stimulative, with a cheap currency and borrowing costs substantially below nominal GDP growth. However, inflation is not a problem in China: Core CPI running as low as 1%. |
Equities: Enjoy The Rally, Think About Insurance
| by BCA Research: 15:16:00, May 22, 2007 |
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According to our Global Investment Strategy service, equities momentum might look stretched, but waiting for a correction is likely to prove too costly.While many technical indicators are warning of a correction, the global equity market has continued to grind higher aided by an avalanche of liquid public savings moving into stocks. Recent market behavior resembles that of the second half of the 1995, when the Fed went on hold and share prices escalated. During this episode, stocks consistently looked overbought and ready to correct, however, a sizable pullback only came in 1998. Waiting on the sidelines proved extremely costly. This leg of the bull market is typically both rewarding and volatile. Correspondingly, investors should stay invested but consider an insurance strategy. Bottom Line: The market is overbought but a hard correction is unlikely. Hedge potential volatility, but stay long. |
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Friday, May 18, 2007
I doubled my position in Google to 8.3% of my overall portfolio today. I think Google has about 30% downside risk from here, but I would assign low probability to that. It is much more likely that Google will be up 30% in the next 12 months and will at least double in the next 3 years.
Wednesday, May 16, 2007
Portfolio as of today
Today I bought Whole Foods just under $40 and doubled my position in Google at $461. CENTRAL GOLD TRUST |
ISHARES COMEX GOLD TRUST |
CENTRAL FUND OF CANADA LTD CL A |
ISHARES SILVER TRUST |
IPATH DJ AIGCITR ETN |
POWERSHARES DB AGRIC |
IPATH GSCI TRI ETN |
DAWSON GEOPHYSICAL |
ECHELON CORP |
AQUA AMERICA INC |
PENTAIR INC |
FUEL TECH INC |
MICROSOFT CP |
APPLE INC |
GOOGLE |
YAHOO INC |
AMAZON.COM INC |
BLACKBOARD INC. |
MONSTER WORLDWIDE |
NINTENDO CO LTD ADR |
WHOLE FOODS MARKT |
GUANGSHEN RAIL CO LT |
HOME INNS & HOTELS |
NEW ORIENTAL EDUCATI |
FOCUS MEDIA HOLDING |
CTRIP.COM INTL LTD |
51JOB, INC. |
CHINA MOBILE LIMITED |
ASIAINFO HLDGS INC |
BAIDU.COM, INC. |
SHANDA INTERACTIVE |
CDC CORPORATION CL-A |
CTC MEDIA, INC. |
VIMPEL COMMUN |
BANCO ITAU HLDG ADS |
TELVISA S.A. |
Agriculture
by Nicholas Vardy
China has lost fertile land equivalent of about the size of Maine each and every year for the past decade. To feed its population adequately, it should be adding that amount. Even Mervyn King -- Ben Bernanke's counterpart at the Bank of England -- recently blamed food prices on a weather-induced drop in supply.
China has lost fertile land equivalent of about the size of Maine each and every year for the past decade. To feed its population adequately, it should be adding that amount. Even Mervyn King -- Ben Bernanke's counterpart at the Bank of England -- recently blamed food prices on a weather-induced drop in supply.
Australia is facing such water shortages that the government is on the verge of turning off irrigation to 50,000 farmers. Rice production has dropped over 90% and cotton production has more than halved. Even wine grape production is impaired. With food prices set to triple, Australians may be set to go on a national diet.
Investing in Soft Commodities: The Biofuels Revolution
The emerging mania surrounding biofuel only exacerbates the problem. With corn-based ethanol the latest (government subsidized) rage, demand for crops as biofuel is set to double by 2030. Today, one out of five bushels of corn produced in the United States is going toward ethanol. With half of Detroit's cars set to run mixed fuels by 2012, ethanol demand is set to jump substantially. To meet its green goals, Europe will have to allocate 25% of arable land toward ethanol production.
Here the law of unintended consequences kicking in. Land shifted toward corn in the United States make soybeans more expensive. Ditto with wheat and barley, as traditional fields are turned toward rapeseed crops. The new demand for corn means a bidding war has erupted between livestock producers and the ethanol industry. We'll be driving cleaner cars, but eating less meat as global output of beef, pork and chicken is expected to plummet by $2 billion as a result.
Killer apps, proprietary edge, and sustainable high margins
By Jim Jubak
Look for the killer app. The killer application -- the software program, piece of hardware, product improvement or whatever -- that everyone has to have is what powers hockey-stick growth. It took everyone a while to figure out what an Internet browser was and what it was good for, but once that period of slowly growing use was past, everybody had to have one, because being browserless was just inconceivable. Same with digital cameras and wireless phones and, before that, with routers and personal computers themselves.
Look for a company with sustainable high margins. In the technology markets of the 1990s, a company could ride a sustainable proprietary edge -- and a willingness to use that temporary advantage over the competition as if the devil were at its heels -- to years and years of outsized profit margins.
or else:There's so much capital in the world now that a high profit margin becomes a red flag that draws a horde of well-funded competitors from around the world -- and at least a few of those are willing to run at a loss for years because the government that has arranged the financing has goals besides profitability.
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