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This is one of those exceptional markets that can send you to the padded room. Likely it's going to test your resolve as no single style ensures success, you may have to work two or three investment strategies simultaneously.
I've got hints of three in my portfolio, and the combination is enough to keep my head above water. I won't be lunching with Bill Gates anytime soon - but I won't be in the long line for the soup kitchen either.
I'm looking for good stocks that are hit 6 or more points in a single session to invoke the "Contrarian" style, I'm retaining nearly 35% of the portfolio in shorts to ensure I have a buffer for the spiral downward, and I keep alert for new stocks that hold promise and are cheap-er. Only home builders and financials are truly cheap, with good reason - so I have to settle for "less expensive" expensive stocks, if that makes sense.
We're heading downward still, and slow accumulation of companies is preferred. Parking cash in things that don't go down as much (if such a thing exists) to maintain compliance, followed by swooping in on some "soiled dove" is my strategy to date.
I added positions in Thompson Creek Metals and the commodity ETF DBA this week. DBA is a basket of grain futures tied to the price of wheat, corn, soy, and similar agricultural crops. As most crop prices remain higher than normal, and the world needs to eat in both good and bad times, this gives me additional exposure to agriculture - with a slightly different flavor.
I managed only a single "contrarian" purchase this week - buying another 250 shares of SRS, the real estate double-short ETF. Down nearly 7 points in a single day was the qualifier, and it popped back up in the next two sessions nicely.
Last week's "tarnished strumpet" Bunge (BG) popped nearly 6 points after I bought it, and slowly settled back over the course of the week. Both trades have yielded positive dollars, and that's all I ask. This style of trade requires amazing resolve - each time you pull the trigger you're catching a falling knife, you're hoping you'll catch it by the handle but you're never quite certain. So far I would consider it the most difficult (from the emotional perspective) style I've learned.
As always, luck to thee.
KB
http://singlebarbed.com
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Comments (3)
Nice post. The wild swings are going to be something we have to get used to but there is opportunity in those swings as you have pointed out.
Uncle John
Posted by Uncle John | February 16, 2008 11:07 AM
Super 'FLY' Guy,
I see you added Thompson Creek ( TC ) to your SLO-2 Port. I remember when it IPO'd in Dec 2007 & the Chrome-Dome Boob-Tube Clown Rec'd
it - it POPped then DROPped as per usual. Jim Jubak wrote about it in his Feb 8, 2008 Column but although he liked it - he did say that he would add to his pasition " later in 2008 when the market settles down'.
I would like to add in my 2-cents worth.
TC is a PURE PLay on Molybdenum ( aka Moly ).
The Moly Market and Moly's price is strongly to Oil & Gass DRILLING as it is used in making drilling pipe, bits, etc. As Drilling goes - so goes Moly and so goes the price of TC stock. TC is Unknown & relatively illiquid & has single-stock risk - why not just invest in BIG Drillers like RIG or Big Oil Drilling Services like NOV ( National Oilwell Varco which is acquiring GRP [ Grant Prideco]to make a Boffo Combo ) whose price is currently depressed like TC which is 15% below it's $20 IPO @ $17. Not So ??
Here's a PDF file outlining Moly's dependence on the level of oil & gas drilling activity.
http://www.sprottmoly.com/pdf/12_07_moly_writeup.pdf
http://www.sprottmoly.com/pdf/12_07_moly_writeup.pdf
There is a PURE Play MOLY Fund that trades in Canada ( MLY : TSX ) and in the Pink Sheets in the USA as ( SMPCF : OTC Other )- The Sprott Molybdenum Participation Fund. It is also 20% below it's price IPO of $5 ( Canadian ) but it spreads risk by buying into Molybdenum Mining Co's ( mainly Canadian 'Junior' Mining issues ) and such. Kinda like a Moly Sector ETF, so to speak.
Sprott does not even let individual USA-types on it's Web-site - you have to say ( actually AGREE) that you are a Fiduciary or a Professional Money Manager or something to grt into the website. They do not release news to the USA either. There are differences in Canadian investment laws and U.S. laws. The main problem is the UNDERSTANDING of the risks involved in this kind of SPECULATIVE fund. It's the same sort of risk as buying TC 'naked'.
Here's some of MLY web-site INFO. NOTA BANE :
Company: Sprott Molybdenum Participation Corp.
Symbol: TSX: MLY
Address: #2700, 200 Bay Street, Royal Bank Plaza, South Tower, Toronto, Ontario, Canada M5J 2J1
O/S Shares: Approx. 41,700,000
Phone: (416) 362-7172 / 1(888) 362-7172
Fax: (416) 362-4928
Email: invest@sprott.com
Contact: Eric S. Sprott, President
Business:
Sprott Molybdenum Participation Corp. is an investment holding company created to invest in molybdenum assets. The primary investment objective of the Corporation is to achieve capital appreciation by investing in securities of private and public companies that explore for, mine and/or process molybdenum and by investing in, holding, selling and otherwise transacting in all commercial forms of molybdenum. It is not an investment strategy of the Corporation to actively speculate with regards to short-term changes in molybdenum prices. The Corporation's investment mandate will provide investors with several benefits. It will provide investors with the opportunity to invest in commercial forms of molybdenum, which is currently unavailable through an exchange. In addition, it will provide investors with a diversified portfolio of securities of private and public companies that explore for, mine and/or process molybdenum.
Moly is used as an alloy with carbon steel ( Carbon - 1/2[%] Moly ) in Europe as an intermediate temperature/pressure pipe alloy.
U.S. practice jumps from Carbon steel to 1 & 1/4 [%] Chrome and 'skips the Euro intermediate 1/2 Moly.
Moly is used in hard-wear Stellite alloys ( Cobalt-Chrome ) + Moly in valves and cutting tool wear-edges. Stellite 21 Co-Cr-Moly is a BioAlloy used in Implants and for Osteo ( Bone Bolts ) surgery, etc. These are MINOR uses for Moly as compared to Drill PIPE & other Drilling Equipment.
I Know I'm 'Wordy', but I Hope I'm helpful, too.
RoiRRawGnikIV ( Viking Warrior spelled BASS-ackwards).
Posted by don ferk | February 16, 2008 2:10 PM
That's a bloody wealth of information, it'll take me a bit to read up on it, thanks for the tip.
In this up-down market the ETF may be a more stable investment than an individual stock - meaning a little less violent reaction to whatever news has hit the street. I find myself gravitating to the ETF stuff more and more.
'Wordy?' no, insightful is a better term.
Posted by Keith Barton | February 16, 2008 2:41 PM