Many times people ask me how I come up with my investment strategy.
Obviously, there is no one answer, but a common trick I use when developing any investment strategy is to look for areas where market sentiment still remains below peak optimism.
Following the tragic events of the Fukushima Daiichi nuclear power plant disaster in Japan, market sentiment for uranium dropped, naturally. As Japan halted all nuclear power plants, shareholders adjusted their investment strategy to get out of uranium mining stocks.
Now, the time when market sentiment is about to shift for the uranium industry, I believe, is close at hand.
The reality for energy use over the next decade is that it will grow massively around the world. Nations like China and India cannot keep up with industrial demand for energy, which is now causing huge amounts of pollution.
Chinese authorities are aware of the polluting side effects of conventional energy sources, such as coal, and are building several new nuclear power plants, which is a much cleaner energy source. Market sentiment will continue to shift in favor of uranium as more nations realize that nuclear power will continue to be with us for some time.
Adjusting your investment strategy before everyone jumps on board is important. Even Japan is now conducting analysis to re-open 14 nuclear power plants, as five utilities within that nation are requesting these energy sources be put back online.
If you’re going to look for a uranium miner to add to your portfolio, one well-established and smooth-running company to consider is Cameco Corporation (NYSE/CCJ, TSX/CCO).
Chart courtesy of www.StockCharts.com
In the latest quarter, … Read More
Apple, Inc. (NASDAQ/AAPL) is maintaining its position as the top seller of smartphones in the U.S., but in the more important global market, Apple is trailing behind its competitors. Unless Apple gains traction in China and the emerging markets, the stock is going nowhere—and that is exactly what institutional money is saying. In the last six months, institutions sold a net 29.14 million shares of Apple, cutting institutional ownership by 5.5%, according to Thomson Financial. The takeaway point in this scenario? When institutions sell, you need to take note and follow the pro money.
Simply put, by looking at where the institutional money is flowing, you can get a better sense of the market. Institutional investors are the money guys who have better access to important information and know when it’s time to jump ship. When a top-ranked analyst says jump, it’s usually wise to jump.
Take a look at the high momentum Internet services stocks. Institutional ownership is declining here, and I’m not surprised, given the massive run-up in prices this year.
Netflix, Inc. (NASDAQ/NFLX) has been the current target of heavy selling by institutions, as the share price surged above $300.00 and the valuation got out of whack at 86 times (X) its estimated 2014 earnings per share (EPS) and a massive price-to-earnings growth ratio at 8.62. Talk about overvalued! Institutions realize this, and over the past six months, 16.13 million shares were dumped, representing a decline of 4.5% in institutional ownership, according to data from Thomson Financial.
Even insiders at Netflix are selling, with 1.06 million shares sold via 26 transactions. On November 4, Neil Hunt, Netflix’s … Read More
While the stock market appears to want to move higher, we may be seeing a shift from high momentum growth stocks like Google Inc. (NASDAQ/GOOG) and priceline.com Incorporated (NASDAQ/PCLN)—which are both trading above $1,000 a share—to the more “boring” names.
The gains made by the momentum stocks have been spectacular so far, to the point where we are seeing overextension on the charts, which are warning of a possible correction.
Cyclical stocks, or those companies that swing with the U.S. economy, appear to be backing off. These include goods and services that are non-essential to the consumer. Spending on these discretionary goods and services tends to fall when the U.S. economy stalls and surges when consumers are spending during the good times, when jobs are plentiful.
Should the U.S. economy falter, you should look at reducing your stock market exposure to cyclical stocks, such as those in the automotive, furniture, retail, travel, and restaurant sectors. When times aren’t so good, consumers will look to cut spending in these areas first to save money.
While the cyclical stocks are continuing to fare pretty well, as shown by the chart of the Morgan Stanley Cyclicals Index below, I believe the stocks will be laggards if the U.S. economy continues to stall.
Chart courtesy of www.StockCharts.com
What you should look at is the defensive sector. I know these may seem like boring stocks, but should the U.S. economy stall, I would look at these companies to outperform the broader stock market.
Defensive stocks are those companies that deliver steady earnings and dividends regardless of how the U.S. economy is doing. In bad times … Read More
Well, the latest numbers related to job creation were recently released and to no one’s surprise, they were worse than expected.
For the month of September, job creation totaled 148,000, down from expectations of 180,000. (Source: Bureau of Labor Statistics, October 22, 2013.) While most people are simply writing off the latest data by saying that the U.S. government shutdown was the primary reason for the lack of job creation, I think there’s much more going on behind the scenes than simply a couple of weeks of not going to work.
This lack of job creation extends beyond simply the past few weeks; the trend over the past couple of years has remained far below potential. Even with the Federal Reserve throwing literally trillions of dollars into the U.S. economy for the past few years, there are no signs of life.
However, looking at the total level of job creation is not enough. Two other key figures you should pay attention to in addition to the total level of job creation are wages and hours worked. The Federal Reserve takes these additional metrics into account when trying to develop a picture of the economy.
The average hourly earnings increased by 0.1% in September, slightly below expectations of 0.2% from the previous month. The average hourly workweek did not change at 34.5 hours.
I don’t know about you, but seeing a mere 0.1% increase in my pay would not cause me to run out and spend more money or feel more secure about my financial future.
Before job creation takes place, you will usually notice hours increasing as employers use existing … Read More
When I read some of the headlines by other news organizations, sometimes I can’t help but chuckle at their oversimplification. Other media outlets take a kernel of truth, and ignore the rest of the picture, only to blow that tiny piece of truth out of proportion.
As an example, there was a recent release by the National Bureau of Statistics of China that reported the Chinese economy grew 7.8% year-over-year for the three months of July to September. (Source: National Bureau of Statistics of China, October 18, 2013.)
That headline number for the Chinese economy does look impressive at first glance. Of course, the mainstream media has used that one data point to extrapolate that the economic recovery we are all expecting is close at hand.
However, the Chinese economy is far more complex than simply looking at the headline data point of year-over-year gross domestic product (GDP) growth.
While nothing would make me happier than to finally hear of a real economic recovery occurring somewhere in the world, I’m afraid that the Chinese economy is simply being pushed higher by a government injection of stimulus that will only be temporary.
While America is suffering from a lack of economic recovery, China is also seeing problems. Inflation is pushing a seven-month high and the government is trying to shift the Chinese economy from being export dependent to domestically oriented.
So while the headline number looks nice, if the Chinese economy hits its target of 7.5% for the full year, it will still be the worst growth level in 23 years. Is that the economic recovery we should be celebrating—the worst … Read More