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XMFSinchiruna (26.98)

Take a deep breath here... and carefully select the unmistakable bargains.

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January 15, 2008 – Comments (4) | RELATED TICKERS: SLW , ACH , CX

Well investors, if you're like me you're still reeling from today's numbers.  I had my biggest one-day decline since I've started investing.  I wish I could say it was a one-day anamoly, but unfortunately indications are that at least at the open tomorrow things will be sinking further.  If you check the after-hours action on some of your holdings, I'm guessing you'll see the same thing... most of my holdings are down an additional 1-3% after-hours... pouring salt on our wounds.  I guess it's possible buyers may start stepping in the pre-market session, but I doubt it.  I think we're in for another tough day tomorrow, and for the time being it seems that no sector is safe.  Everything was off today... gold/silver, miners, oil and gas, BRIC ETFs and ADRs (especially China)... it was hard to know where to go.  I did do some buying today, too much in retrospect, but long-term I know I got some good deals.

 Most of you probably are familiar with Peter Schiff, the analyst who often appears on Fox (Faux) News as their go-to guy for gllom and doom scenarios.  Well, I have tremendous respect for him and think he's right on the money.  And all his co-analysts who've been laughing in his face for months must be starting to feel foolish.  Of course, Peter is very very bullish on silver and gold, as am I.  Though these metals could decline with the market for several days here, I don't think this correction will last for more than a number of days before returning to their bullish pattern.  Remember, despite what the mainstream media might tell you, gold will surpass $1,650, and is extremely likely to take out much higher targets... above $2,000 and beyond.  They call it a safe-haven for a reason.  Peter seems to be the only one who was saying we were heading towards a depression before anyone else would even utter the word recession.  His recipe for preserving capital and making money in these trying times?  Gold/Silver bullion, precious metals miners, other commodities (wheat, oil, etc.), and buying outside the US at every turn.  He recommends select foreign currencies (NOT the EURO!), and he recommends non-US ADRs that are large, solid companies with a depression-resistent business, preferably paying a dividend and with a P/E in the single-digits.  His strategy rings so true, and happens to be exactly the way I've been investing for the past several months, well before I knew who he was. 

What was I buying today?  Well, I sold ABX (Barrick Gold), simply because I had a stop order in at $50.  It's had quite a run from $30, and I think some smaller players will outperform it in the short term.  I bought some Silver Wheaton (SLW), since silver continues to lag behind gold in this cycle, and is bound to catch up to historic ratios.  SLW is highly leveraged and has several impressive royalty contracts on the books.  It's recent downgrade was unwarranted in my opinion.  I bought GRS (Gammon Gold).  This is one of my favorite underdogs!  They scaled back production for a quarter because they knew the price of gold was going higher... a very bold move in my opinion.  Under $8 this one is a steal!!! And I bought some RIO (Companhia Vale do Rio Doce).  It has slipped further after-hours, and I highly recommend this one under $31!!! That's all I bought for metals.  There were too many compelling buys elsewhere. 

Chinese ADRs were pummeled today, including my favorite one of all, ACH (Aluminum Corp of China.  This stock is so oversold it gives me gose-bumps.  It's massive in scale, produces lots of things people will always need (China's economy will not come to a screaching halt the way ours will), it pays a 1.8% dividend, and has a P/E ratio of 3.37!!!  As a bonus, the company bought out an old favorite of mine last year:  Peru Copper (CUP).  Despite what the market is saying with its illogical bashing of basic metals miners, these metals will continue to go up in price for the long-term.  Aluminum and copper are both terrific investments, and ACH is the best deal out there in my opinion.  If it goes below $40, I'm selling some beloved stocks to buy some more.  TCK, the Canadian mining conglomerate, is also a very attractive buy at these levels.

That's not all I bought in China today.  I picked up a little FXI, the Chinese iShare.  I also bought 2 Chinese solar companies, both of which have done very well of late, and both of which came back 15% or more today!!  That's a huge one-day drop, and it smelled of panic selling to me.  The ADRs are SOLF (Solarfun), and STP (Suntech Power Holdings).  Both of these could see increased weakness after their impressive run-ups, so I only bought a starter position.  I will double up if either of them dips 10% from these levels, and so-on.

Speaking of solar... I did buy two US equities today... I bought a few shares of BioSolar.  I first bought this one at $0.45, and took some profits at $1.48 just yesterday.  When I awoke to see the stock back below a buck, I couldn't help but to buy back in.  This CA company has a patent on a very interesting organic plastic material made with renewable plant materials rather than the petroleum-based plastics that are often used as backing material in solar panels.  The company is just transitioning from prototype / market introduction phase into production, and they've been intelligent about courting the Chinese solar companies in search of contracts.  They're first big contract will see a huge spike in the share price.  Everything I've read about their product indicates that it's cheaper to produce than petroleum-based plastics, and has better performance to boot!  I think one can buy safely under $1.00, and either sell at $1.30 for a quick, safe profit... or ride it all the way and see what happens.  By the way.... the other US buy today was VLO (Valero). though I see it's dropped further since my purchase.  It's down to a P/E of 5.75, and I think gas prices are going higher.

I also bought some CX (Cemex), the Mexican cement conglomerate, because it fits all the criteria... it's a huge international firm creating lots of things people will always need, and they have a P/E of 8.45 and pay a dividend of 2.9%!  I picked up a very small starter-position of EWZ, the iShare for Brazil, because several analysts seem to agree that Brazil could remain robust even in the face of major difficulties in the US and elsewhere.  It's down under $75 after-hours, so for anyone who doesn't own it I recommend getting started here as well.  Again, it could dip further, but that will just be a buying opportunity!  I've owned EWZ at least 5 times over the past 2 years, and have done well with each trade... this time I plan to hold for the long-haul.  I also picked up a little RSX, the Russian ETF from Market Vectors.  I noticed the holdings were very heavily weighted towards Russias oil and gas firms and with metals miners.... the best of all worlds.

Now... I should make a disclaimer... were I not already very heavily weighted in precious metals and miners, I probably would have been focusing more on those bargains today... as today's action produced some great opportunities to be sure.  But for the very short term, I mean like this week.... it's too tough to know whether gold will get back above $900 and stay there, or whether it will slide a little further into the $880s or even into the $870s.  I would be very surprised if it fell any further than that.  Silver will remain above $15.50 almost assuredly, and I expect it to be back up over $16 and up towards $17 in the coming weeks.

Also, while I only bought 2 US equities today, there are several that i have my eye on.  I own a little CAT (Caterpillar), and I am interested in owning more on any significant pull-backs.  CAT's business in China is on the rise, and miners all over the world are gobbling up their equipment and off-setting the declines in US demand quite well in my opinion.  XTO Energy I expect to do well as natural gas prices improve throughout 2008... and same goes for my 2 favorite smaller oil and gas producers (Gasco Energy and Double eagle Petroleum).  Metals recycler Metallico (MEA) is a can't miss... and WMI (Waste Management) is approaching a great discount, though it may fall below $30.

I hope these ramblings about my investment strategy as we approach what I perceive as a depression will be helpful for at least one investor out there.  I know some people must be feeling overwhelmed after today, and please know you're not alone.  Today was a very difficult day for us all.  But Cramer is right about one thing... there's always a bull market somewhere.  :)  Hang in there, find some defensive values, and get some starter positions with an eye towards doubling down every time that bargain declines 10% further than you expect it to.  That's my strategy, and it has served me well so far.  Good luck to us all, and may we all preserve our capital through what will be an historic year of pain and turmoil in the US markets!  Be Careful!  And please... let me know if any of you act on any of my recommendations.  I'd love to know I've helped someone.  Feel free to ask me any questions you have.  I'm here to help.

4 Comments – Post Your Own

#1) On January 15, 2008 at 11:39 PM, joeykid13 wrote:

011608 25225 933637329

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#2) On January 16, 2008 at 12:30 AM, FourthAxis (< 20) wrote:

Calling bottoms huh?  (Yawn)

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#3) On January 16, 2008 at 1:23 AM, 292972826 wrote:

I have the same strategy and like most of the stock that your are talking about. I will add some oil company to the list.

PWE 26$ with 16% dividend on a monthly basis

PCZ 52$ 

Some more brazil GGB 28.75$

And maybe some drilling because an oil price at 100$ or above is stressing the market to do more exploration...

 

 

 

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#4) On January 16, 2008 at 11:28 AM, XMFSinchiruna (26.98) wrote:

Joey:  ?  Is that an international phone #??

Fourth Axis:  I did not set out to call any bottoms, and I think I was careful to state in several cases that I was buying small starter positions as an entry point into equities I wish to hold for the long-term.  While I am surprised at how quickly this has all come to the fore, I have seen this depression coming for years now, and have had this strategy in mind.  Today's action is a bit of a surprise in its level of pain, but for the investor who has the fortitude to stay in the market and seek out long-term value, I think there is plenty of value out there.

Slycal:  I totally agree.  In real life I own a basket of Canadian Royalty Trusts, and I love the monthly dividends.  :)  PWE is my second biggest holding in my portfolio, 2nd only to CEF, the Canadian gold/silver bullion holder.  I also recommend AAV, ERF,HTE,PGH and PVX.  Gerdau is out of my comfort zone, as it has not been battered by the recent action to the extent of some international competitors, and the dividend is not as high as I would like.  I'll keep an eye on Petro-Canada... I had watched it in the past but it fell off my radar.  Thanks for the tip!

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