Investment Contrarians

oil


This Commodity the Next Big Trade in Energy Stocks?

By for Investment Contrarians | Nov 27, 2013

Next Big Trade in Energy StocksIn many cases, companies in transformative industries can, at times, offer significant value—and natural gas is no exception.

At this time, I see a large amount of potential upside in this commodity. While there has been a lot of hype around electric vehicles and other alternative energy sources, I believe natural gas will play an increasingly larger role in our economy.

There are several reasons why I believe this, including the fact that the fossil fuel is quite abundant in North America; it burns clean, so it’s better for the environment than coal or oil; and it’s relatively affordable.

Now, in the trucking industry, there has been a significant shift toward natural gas-powered trucks. This includes all kinds of vehicles, from long-haul to garbage trucks.

As an example, Waste Management, Inc. (NYSE/WM) currently operates more than 2,200 of these vehicles and is continuing to convert its fleet away from diesel-powered trucks. The company recently opened its 50th natural gas fuel station. (Source: Waste Management, Inc. web site, last accessed November 25, 2013.)

The benefits are obvious, as Waste Management reduced its consumption of diesel by 8,000 gallons per year, while also cutting 22 metric tons of greenhouse gases. The lower costs for operating these vehicles and the reduction in environmentally harmful emissions are huge benefits for using this commodity as a power source.

When it comes to looking at energy stocks in the natural gas sector, we have to be careful, as there are a variety of operators. Some energy stocks are extremely young and are still incurring losses as they expand production facilities. Because natural gas prices still remain … Read More


What the Wealthy Are Doing to Beat Inflation

By for Investment Contrarians | Oct 7, 2013

Beat InflationWith practically every central bank around the world having the throttle fully open when it comes to monetary policy, investors with extra cash just lying around need to do something with it. While you could put this cash in a government bond or simply keep it in cash, these options aren’t going to help you beat the rate of inflation. Instead, investors should take a cue from the superrich and consider an investment strategy that includes hard assets.

As you may already know, an investment strategy that comprises hard assets includes traditional stores of wealth (such as gold and silver) and commodities (such as oil), as well as artwork and even cars.

While I advocate the traditional investment strategy of becoming a part owner in companies through equities, there are growing signs that even the superrich are becoming increasingly worried about having cash sitting idle and are looking at hard assets as part of their portfolio.

Just recently, a 1963 Ferrari “250 GTO” sold for $52.0 million! I like a nice car as much the next guy, but $52.0 million is a lot for one vehicle.

Obviously, the person buying it is not using it just to go grocery shopping; rather, it’s likely that the new owner is incorporating this item as part of their investment strategy to include hard assets (in this case, collectible cars).

To show you just how strong the market is for alternative hard assets by the extremely wealthy, a similar Ferrari 250 GTO sold last year for $35.0 million, which means this year’s sale is a 49% increase in price.

Of course, price appreciation in … Read More


How Escalating Syria Conflict Could Open an Investment Opportunity

By for Investment Contrarians | Aug 29, 2013

Investment OpportunityWe may be headed for an opportunity driven by chaos. These are the times when money can be made.

The stock market is on full alert with the news that the United States may mount a military intervention against the controlling government in Syria on speculation of it using chemical weapons on civilians.

We have already seen a flow of capital into the precious metals, such as gold and silver, which are both trading at multi-month highs, and oil, which would be affected by a conflict in Syria.

As evidence of the U.S. military entering into the conflict mounts, we will see nervousness surface and traders dumping equities, moving into gold and cash instead.

But rather than wait for an escalation of the Syrian conflict, you should begin to look at the different ways of making some quick profits if further tensions materialize.

The most obvious strategy is to buy gold, as it’s still regarded as a safe haven during periods of crisis and chaos. The precious metal moved higher after the U.S. launched its military into Iraq in 2003, as seen in the chart of gold prices below. In fact, the U.S.-Iraq conflict helped to drive the massive decade-long bull market in gold. So, if the U.S. does get involved in Syria, then consider looking to accumulate gold futures or gold exchange-traded funds (ETFs).

Gold Spot Price Chart

Chart courtesy of www.StockCharts.com

Of course, in the event of an attack, I would expect selling to intensify in the stock market. In this case, an interesting ETF that plays an upward move in gold and downward move in the S&P 500 is the FactorShares … Read More


An Investment Opportunity Not Seen in Eight Decades

By for Investment Contrarians | Jun 20, 2013

Investment Opportunity Not Seen in Eight DecadesWhile many commodities have seen their prices drop in 2013, oil prices have been an exception, as they have held up remarkably well.

While the global economy still remains at low levels of economic growth, oil prices incorporate geopolitical risk. There still remains potential for violent uprisings in many parts of the world, which would lead to higher oil prices.

Even though people want to move away from hydrocarbons as an energy source, for the near future, we will continue to use oil as an input in many parts of the global economy.

And now a new development is opening the door to an investment opportunity not seen in almost eight decades.

As of December 2012, Mexico has a new president, Enrique Pena Nieto, who is making radical changes that will benefit his nation dramatically. He is a pro-business leader, and since his term began, the Mexican economy has already seen a significant improvement in its current outlook, as well as the potential for future growth.

Mexico’s new president is now looking to end the country’s multi-decade state-run monopoly on oil and natural gas.

As oil prices remain far higher than oil production costs, there is a significant long-term investment opportunity in this sector. The U.S. economy will still remain quite dependent on oil for many decades, and many American firms lead the world in technological knowledge and skills in extracting both oil and natural gas.

If Mexico does open the door to foreign businesses, this will be a huge investment opportunity. Both deep-water drilling and shale-rock formations have extensive levels of reserves, yet Mexico’s state-run oil company, Petroleos Mexicanos … Read More


This Sector Hasn’t Seen This Much Action Since ’97

By for Investment Contrarians | Jun 11, 2013

Unique Investment Opportunity Born in AmericaSomething just occurred that has not happened since 1997: the U.S. produced more oil domestically than we imported. Just a few years ago, people would’ve viewed that statement as simply a fantasy.

This is a perfect example of what happens when business owners see an investment opportunity that will help create corporate earnings. The escalating price of oil and the growing dependence on imports led to the creation of new technologies, which has now resulted in a massive increase in oil production.

The U.S. has imported on average 60% more crude oil than domestic production over the past 16 years. Because of the development of new technologies, shale-oil production in areas such as North Dakota has exploded. (Source: U.S. Energy Information Administration web site, June 5, 2013, accessed June 7, 2013.)

This has created a massive investment opportunity to generate corporate earnings for a very long period of time. The level of oil and natural gas that the U.S. has available is immense.

However, even though there is an investment opportunity to generate corporate earnings, one must be careful in choosing which stocks to invest in. This is because the push into this sector has led many firms to expand production, as they, too, sense an investment opportunity to increase their own corporate earnings.

This has led to a massive increase of supply, which is set to continue. I think that simply buying any company in this sector is not the right approach. While we are all aware of the significant investment opportunity, not all companies will share in the growth for their corporate earnings evenly.

Obviously, each company’s merits … Read More