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No Investment Sheep in Sight
Thursday, June 09 2011 | 11:27 AM
|If I had to pick one commodity that is still out of favour with investors it would be natural gas. When I study a long term chart of natural gas (monthly) I see a bear market low in September 2009 followed by a large 20 month symmetrical triangle. This in turn has printed a series of higher lows and is about to generate a positive 10-month ROC number.
We need to get into the natural gas space before the investment sheep arrive. In this case the investment sheep will likely be those trend following portfolio managers who are currently chasing the utilities, consumer staples and telecom stocks. Now when the sheep take note that natural gas prices have stopped declining (three higher lows since last October 2010) they may begin to accumulate the shares of the natural gas producers.
Some smaller names would be Celtic Explorations Ltd., Trilogy Energy Corp, Birchcliff Energy Ltd, Paramount Resources, Fairborne Energy Ltd., Perpetual Energy Inc, Corridor Resources Inc., Tethys Petroleum Ltd., Delphi Energy Corp. and Vero Energy, Inc. The big go to name is EnCana Corporation (ECA). The long term (monthly) chart of ECA displays the monthly cycle troughs of 2003, 2008 and 2009. Note the pending trough of May 2011 that is about to signal the end of the short 10-month ECA bear. This pending cycle trough is supported by an improving relative reform signal. On a P & F chart ECA needs to break above $35 to trigger a bullish stampede into the name.
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0 Comment | Add Comment(s) | Commodities, Investors, Energy, Natural_Gas, |
ETFs Jump In It
Tuesday, March 22 2011 | 03:31 PM
Chief Investment Officer,
YOUR SOURCE FINANCIAL (RIA)
|If you didn't hear, Index IQ is coming out with a global small cap agribusiness ETF that will have ticker CROP. It is supposed to start trading today.
About all I could glean for now about the make up of the fund is that it will hold stocks from a lot of different countries, no stock will exceed 10% (subject to rebalancing) and 30% of the fund will be in crop production and farming. We'll see what that means perhaps as soon as later today but this could be about a close as we get to a farmland ETF.
There are all kinds of plantation stocks trading in Asian markets and a couple where the plantations are in Asia but the stocks list in London. These are not easy to trade and if the fund captures that then this stands to be meaningful and also have the potential to look much different than Market Vectors Agribusiness (MOO) that we own for clients.
Emerging Global filed last week to dramatically increase its India offerings with sector funds that correspond to the ten big SPX sectors. They already have India covered with infrastructure and small cap. India has become a tougher market to own, fundamentally. A few years ago it seemed like anything India went up, this was also the case with Chinese stocks. As is often the case the theme has evolved and success requires being more selective.
Long story short I want no part of financials or telecom in India. The other sectors are all at least maybes. Any broad large funds will have exposure to those two sectors, the EG Shares India Small Cap Fund (SCIN) doesn't seem to have any telecom but does have some financials in it. The consumer space is very promising from the top down but buying that fund would depend on what was in it. I think utilities is kind of a sector for the future as there are things like hydroelectricity but the electricity infrastructure seems fairly primitive for now. The industrial and materials sectors will obviously capture the infrastructure needed as well the actual infrastructure fund.
At some point I expect we'll add India across the board as we had it quite a few years ago and it would be nice to have choice at the sector level as individual stocks from India are a little tougher to access.
WisdomTree now has an Asian bond ETF and it avoids Japan which is a plus. I wrote about it for theStreet.com. WisdomTree has a Latin American bond ETF in the works which could also be very interesting unless it is 40% Mexico or something.
Yesterday I stumbled across a Brazilian hydroelectric company called AES Tiete (AESAY). I don't know much about it yet but where there is at least one in Brazil, India and a couple in China I'm thinking there are several others around the world--maybe enough for an ETF? Alternative energy is a volatile space but I think it makes more sense to consider when the alternative energy comes from the utility than when it is dependent on the end user retrofitting their home.
Maybe we can add this to the list of ETF ideas we've compiled over the years which includes toll road, air and sea ports, cement companies and publicly traded exchanges.
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0 Comment | Add Comment(s) | ETFs, Indexing, Emerging_Markets, Energy, Agribusiness, Asia, |
The Red Hot Energy Sector
Monday, March 07 2011 | 02:06 PM
|I acquired the shares of Encana, Suncor and Precision Drilling six months ago when the TSX Energy Index was in mid 2010 one of the worst performing sectors. At that time the “hot” sectors were Gold, Heath Care and Telecom. There were no investment sheep in the energy complex last summer and so I helped myself to the all-you-can-eat energy buffet. How the energy sector is enjoying a bullish stampede thanks to the crude risk premium due to the uncertain outlook for the larger crude producing Arab states.
I have always believed that when the sheep are hungry you should feed them. Now so far I see no reason to sell all of my energy positions but, I am reducing and moving the proceeds into another sector that the investment sheep are avoiding – the TSX Financial Sector. The sheep are avoiding the obvious crude risk losers like the airlines, transport companies, non-essential retail stores and travel to include fast food, hotels, theme parks and gaming. I think the Canadian Banks are winners either way if the crude risk trade either ON or OFF. Either way I like the Baa, Baa, Banks.
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0 Comment | Add Comment(s) | Energy, Indexing, Oil_Prices, Trading, |