Published July 18th, 2007
in Absolute Must Reads and Trading School.
Wall Street has been advocating diversification forever. I have my cynical reasons why, but that’s a story for a different day. However, in certain sectors diversification is necessary. Gold mining is a great example. I have been trading these stocks for a number of years. Apparently a 10-15% meltdown, when least expected, is part of a gold miner’s DNA. On the flip side, since the industry is consolidating 20-30% pops to the upside are not uncommon either.
Many analysts suggest buying at least 10 stocks to sufficiently protect your self in highly volatile sectors. Thus, commissions could become excessive if trading multiple sectors in a small account. Mutual Funds were the first vehicles designed to provide sufficient diversification at a reasonable cost. Exchange Traded Funds (ETF) are Wall Street’s latest incarnation and have become extremely popular. Their fees are often lower than mutual funds and offer some trading advantages over mutual funds. ETFs are great, but I contend that the next best thing is already here with basket trading.
Continue reading ‘Using Basket Trading to Get Ahead of the Herd’
The government’s big ethanol push is driving up the prices of everything including a night at the movies. I just heard on the news that the price of popcorn has increased due to higher corn prices as more corn is being used to produce ethanol. It is time to think like an investor and put a hedge in place to offset rising prices at the grocery store as well as the movie theater. Purchase a few of these agriculture stocks and not only will it make up for higher prices, but it will put a few extra bucks in your pocket.
Our survey begins with the Capital Goods & Services sector - home of Farming Machinery giant Deere Company. Deere is a household name, but have you heard of CNH Global NV (CNH)? The company is based in Amsterdam, the Netherlands. It manufactures and distributes agricultural and construction equipment worldwide. The company generates $13B in revenue - making it about half the size of Deere. As the saying goes, good things come in small packages as the market has bid it up 90% year to date. Continue reading ‘100 Stocks to Combat Rising Food Prices’
On Thursday, June 15, the Admiral, Eric Bolling, of CNBC’s Fast Money, presented an update to his Agricultural Stock trade (Ag Play). To capitalize on the trend of higher commodity prices allowing farmers to spend more money on new equipment, higher yielding seeds and better fertilizers – he constructed a four stock portfolio.
The stocks are Monsanto Company (MON), a seed producer, Agrium Inc. (AGU), a fertilizer supplier, Bunge Limited (BG), a grain and seed processor and Deere (DE), a farming equipment company. I have been trading energy as well as precious and base metal stocks for a number of years. The idea of playing soft commodities via the stock market was quite appealing. I wrote about it in “Eric Bolling’s Agriculture Stock Play: Is it Too Late?”
Continue reading ‘How I Made Eric Bolling’s Agricultural Stock Play My Own’
My jaw hit the ground last week when Eric Bolling, of CNBC’s Fast Money, stated that his agriculture play was up 59% year to date. It hit the floor a second time when he mentioned how he was playing the sector. I have been trading commodity stocks for awhile, primarily gold, energy and base metal producers. The soft commodities (coffee, sugar, grains) have caught my attention on occasion. However, I couldn’t figure out how to trade them via the stock market and I wasn’t interested in the futures market.
Jim Rogers stirred my interest a few years ago when I read his book “Hot Commodities.” He made it quite clear that we are in the midst of bull market in all “real things” not only oil, natural gas, and metals, but also wheat, corn, soybeans, etc. However, Rogers cut his teeth as a commodity trader. He believes that the best way to participate is to buy the underlying commodity (futures) or a commodity index fund. Since futures are not for me and mutual funds are right up there with watching paint dry, his book didn’t provide any implementation insight that I could leverage. Continue reading ‘Eric Bolling’s Agriculture Stock Play: Is it Too Late?’
Published June 19th, 2007
in Absolute Must Reads and Trading School.
I am often asked how I determine entries and exits for my trades. Let’s take a look at a real time example and walk through the process. It is currently 11:00 AM New York Time on Tuesday June 19, 2007.
First and most importantly, I determine how much risk I am willing to take on a trade. My preference is to limit risk to 1-2% of my portfolio. In this example, I will use a portfolio size of $50,000 and limit the risk to 1%. So that means I am willing to only lose $500 on a trade (1% of $50K). Continue reading ‘Stalking a Trade Thru the Eyes of a Trader’
I just received notification that I was included on the Top 100 Most Inspirational Personal Finance Turnaround Stories Online List. That’s a mouthful. This is the second time that I have been included in a top 100 list. It is always exciting to be recognized in any manner. It means that you are making a difference in whatever endeavor you are pursuing.
I was included in the entrepreneur section:
Entrepreneurs are a different breed. Often unwilling to toil away in a cube farm, they decide that they want something bigger. Unfortunately, something bigger usually involves huge risks. These people took the troubles in stride and have all become successful entrepreneurs.
BTW, they mentioned in my write up that “he realized that financial freedom is not about being rich, it’s about getting by.” Getting by is definitely one approach, but not my preference. Since it is imperative to generate more income than expenses, one can either cut expenses to meet your income (getting by) or increase your income to meet your expenses. I choose the latter. More on that in a later post.
Top 100 List
I am sure that many of you watch or have watched CNBC’s Mad Money with Jim Cramer. Personally I think the screaming and boo-yaas are a little much, but I do watch it on occasion. I like Fast Money much better - it comes on a couple hours later. I am quite honored, because it looks like old Cramer has been sniffing around my blog looking for ideas 
Back in the glory days Intel (INTC), Cisco (CSCO), Dell (DELL) and Microsoft (MSFT) were known as the four horseman. They were the “go to” stocks. Owning them were like having your own money tree. However, they have all taken it on the chin since then - Intel and Cisco are down 71% and 67% respectively from their high points in 2000, while Dell and Microsoft are down 54% and 49% respectively since 1999.
Last week Cramer announced his new “four horsemen” of technology: Apple (AAPL), Research in Motion (RIMM), Google (GOOG) and Amazon (AMZN). Two of those names, Apple and Research in Motion, are the members of my recently formed The Big Spend portfolio. Interestingly Cramer and I converged on those names using two completely different approaches, but our conclusions are the same. These stocks have the potential to significantly outperform the market and are in the midst of secular (long term) moves. It’s time to get on board.
As an entrepreneur, I am constantly thinking in terms of opportunities. A little over a year ago my mother, who lives in Florida, had a car accident. She had a visiting nurse come in for a few weeks and I thought what a great business this would be. With an aging population, especially in Florida, there would be a tremendous demand for such services. Other services such as a personal shopper popped into my head. When I came back to Boston, that idea would fade and would be replaced with others.
Reading a report “Five Key trends in Chinese economy: Merrill Lynch,” about a month ago and a television commercial put my opportunistic mind in gear. I had been thinking about creating another BBO like basket. I am sure by now you know that the BBO is a basket of stocks based on the industrialization of the emerging markets. It leverages the infrastructure boom as the emerging markets build railways, airports, highways, etc. This is actually #2 on the Merrill Lynch list. I have investing in this theme for the last three years.
Their #1 trend has captured my attention: Continue reading ‘Introducing The Big Spend Portfolio’
Long regarded as the world’s growth engine the U.S. economy is currently experiencing a rough patch. This was highlighted by first quarter GDP of 1.3% down from an annualized rate of 2.5% in fourth quarter 2006. Anticipating the slow down, Wall Street analysts lowered first quarter S&P 500 earnings from 8.7% in January to 3.3% by the first of April. However, after all is said and done it appears as though Wall Street’s concerns were for naught. Earnings will be closer to 9%, better than the historic average. How could this be?
Continue reading ‘Dirty Clothes are Big Business’
I was shocked last week when I read a report from Merrill Lynch stating that BHP Billiton could possibly be a target of a private equity bid. BHP Billiton is the largest mining company in the world. I have always envisioned it as the acquirer not the acquiree. However, with so much money at stake - anything is possible.
According to Forbes, “China is moving at a pace that amounts to building a city the size of Houston every month. There are more sky cranes in the city of Shanghai alone than in the rest of the world. They are pouring a lot of concrete, stringing a lot of wire, plumbing a lot of pipe and pounding a lot of nails.” China is not alone in its thirst for industrialization. “India’s year-on-year growth rate could well hit double figures at some point in 2007, and the country may even grow faster than China for at least one quarter,” per the Economist. In BHP’s most recent half-year report, it reported revenue of $22 billion an increase of 22% over 2006. Supplying resources to the emerging markets is clearly a high-stakes game.
Continue reading ‘Mining Merger Mania: Say It Three Times Fast’
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