As my long-time readers know, contrarian investing is all about buying when others are selling and selling when others are buying. Getting in ahead of the crowd is the key to successful long-term investing.
One market segment that has been severely hit over the past few months and could be ripe for long-term investing is the international potash market. Two firms operating out of Russia and Belarus essentially control approximately 40% of the potash market through a cartel that dictates supply and, ultimately, pricing.
In July of this year, this cartel collapsed, with one of the firms changing their strategy to maximize volume. This caused potash prices to drop by approximately 33%.
I believe there is a long-term investing opportunity in the international potash market. The current squabble between these two firms really is a soap opera, involving egos and politics centered between former Soviet Union nations.
For long-term investing purposes, one has to envision what’s likely to occur over the next few years. I don’t believe that management and the political leaders of both Russia and Belarus want to see potash prices at such low levels when they are able to reduce supply and raise prices.
This creates an investment opportunity for domestic potash producers.
While the overall stock market has soared, potash companies have seen their share prices drop significantly. For long-term investing purposes, I believe this is creating an attractive investment opportunity.
When it comes to long-term investing in a sector that’s beaten up, I would suggest looking at the market leaders, since they have the cash on hand to weather the storm.
Potash Corporation of Saskatchewan … Read More
Most readers, I’m sure, are aware of how weak the eurozone has been over the past few years. That area has had essentially no economic growth at all for quite some time.
But now, eager to find any investment opportunity, some investors are looking at the eurozone as a value play, hoping for a turnaround and a possible acceleration in economic growth. These thoughts of investing in the eurozone, however, are based primarily on hope. As I said, there are no signs of economic growth emerging at all. But you don’t have to take my word for it…
Recently, the European Commission issued its forecasts and, well, the news wasn’t good.
According to the European Commission, real gross domestic product (GDP) growth in the eurozone on an annual basis this year will be -0.4%—meaning contraction. For 2014, estimates are for a mere 1.1% growth, and in 2015, that number only increases to 1.7%. (Source: “Autumn 2013 Economic Forecast,” European Commission, November 5, 2013.)
I’m sure this isn’t breaking news to my readers: another year, another weak level of poor economic growth in the eurozone.
What’s interesting, however, is how the European Commission calculated its estimates. According to the European Commission, economic growth in the region will be a result of “resuming private consumption growth and the rebound in gross fixed capital formation.” (Source: Ibid.)
Capital formation I can understand; money can easily move to areas that offer the best opportunity. However, expecting private consumption to drive growth in this region surprises me.
If you think America is having a tough time with unemployment, you obviously haven’t been to the eurozone … Read More
When talking to a friend of mine the other day, he brought up a common misconception; he thinks that it’s been impossible to make money in the stock market over the past 10 to 15 years.
After he told me his investment strategy, it was clear that the problem was with his approach and not with the opportunities available to investors.
For investors who focus on the long-term horizon, one of the best approaches is to incorporate the investment strategy of the greatest investor of all time: Warren Buffett. At the core, his investment strategy is exactly the same as mine: “Be fearful when others are greedy, and be greedy when others are fearful.”
What do most investors do wrong when it comes to forming a profitable investment strategy?
The average investor does the exact opposite of what is needed to have a successful long-term investment strategy. By letting emotions get in the way of logic and reason, people panic at the bottom and get caught up in the frenzy at the top of the market.
Let’s take a look at the S&P 500 as an example. Many investors sell their stocks during times when the S&P 500 is crashing out of panic that perhaps the economy will crash too—or maybe they’re worried that the world is going to end. Either way, the response is irrational panic. This is precisely when one should consider buying into the S&P 500 and stocks in general, taking advantage of this investment opportunity.
Chart courtesy of www.StockCharts.com
Above is the S&P 500 monthly chart going back to 1999. When you think about it, the … Read More
The key to a great investment opportunity is to get in before everyone else. As most readers who follow the markets know, the results of the latest Federal Reserve meeting were quite a surprise, as the central bank determined that now was not the time to reduce its asset purchase program.
That news was a green light for people to pile into the markets. Gold bullion made its largest jump in over a year. However, those people who were waiting for the right investment opportunity to get into gold bullion should have been looking for a better risk-to-reward entry-point earlier in the year.
Back in early July, when gold bullion was being heavily sold, I told my readers that the price at that point was quite attractive. (See “Investing in Gold Bullion Is All About Timing—Here’s How to Do It Right.”) While there certainly is potential for a long-term investment opportunity in gold bullion, one has to be careful to not blindly chase a market.
Looking at the physical demand for gold, people in countries such as India still see an investment opportunity over the long term. Just recently, the Indian government once again raised taxes to try to curb imports—and limit demand for the precious metal. This time, the Indian government increased the import duty on gold jewelry from 10% to 15%. The import duty on gold bullion itself still remains at 10%. (Source: “India raises import duty on gold jewelry to 15 pct,” Reuters, September 17, 2013.)
India is experiencing severe problems due to capital outflow, as citizens there sell their currency, the rupee, to buy gold. This … Read More