40 years ago, Motorola had not invented the cellular (mobile) phone.
Today, wherever you are in the world, you've probably heard of the mobile phone - unless you're a member of a recently discovered ancient "tribe" in the Amazon rainforest. There are now almost as many mobile subscriptions in the world as there are people.
Imagine if you knew today what could be a business phenomenon like the mobile phone 20, 30, 40 years from now. Even better, imagine if set yourself and/or your dependents up now to make money from such a phenomenon.
Well, fellow self-directed (retail) investors, one way to discover future business gems is to research and study trends. A trend simply is the progressive tendency or inclination of something.
I have identified the following six global trends that are facilitating the emergence of companies and businesses likely to make their investors very rich years from now:
Showing posts with label Stocks. Show all posts
Showing posts with label Stocks. Show all posts
Wednesday, February 20, 2013
Wednesday, February 13, 2013
WHAT’S WRONG WITH NIGERIAN STOCK MARKET REPORTS?
The short answer is that they are useless for stock market investors.
Whenever I read a local newspaper report on market activity on the Nigerian Stock Exchange (NSE) I’m just frustrated. All you get is that the market gyrated by some basis points and who the gainers and losers were. That’s it.
There’s hardly any mention of what moved - or could have moved - the market or a stock. Nothing inspires or motivates you to look deeper into the market or a stock for possible investment. Nothing makes you curious about stocks or the stock market. It’s like the journalists are too lazy to write something insightful.
For example, look at the stock market report for Monday, February 11, 2013, from Nigeria’s Business Day. Now compare that report to this report for Tuesday, February 12, 2013 from Reuters on U.K. market activity. See the difference? Nigerian commentators don’t try to connect the dots for uninitiated readers.
It’s no different when I hear a market report on radio.
Maybe this lack of easily-accessible and insightful stock market information is why most Nigerians don’t care about investing in stocks, which remains one of the easiest and fastest ways to make money wherever you are in the world.
I’m amazed at the increasing number of Foreign Exchange (forex) trading seminar ads I see in Nigerian newspapers. I doubt Nigerians trade forex in droves. Nonetheless, if Nigerians can take to forex trading then they can take to stocks trading because the forex market is a lot more complex than the stock market and Nigerians love simplicity.
Nigerian stock market commentators and writers need to do more than report statistics. The Financial Times and The Wall Street Journal are dailies yet they certainly try to get behind the numbers.
The regulators should take note. There’s no point in the Central Bank of Nigeria and/or the Securities and Exchange Commission compelling companies to list on the NSE when a majority of Nigerians don’t have the financial education to invest in the stock market.
I became a self-directed investor in 2006 - a year after I got out of B-School in the U.S. At the time I knew nada about investing in stocks, other than what I’d learned at B-School.
I learned the basics of stock market investing mostly from reading financial dailies and periodic magazines – Fortune Magazine is great for investigative journalism. I also frequented educational sites like the Motley Fool (www.fool.com) and Investopedia (www.investopedia.com).
I was so excited about what I was learning that I started this blog to share as I learned.
Wednesday, March 03, 2010
Will Lawsuits Become Apple's Waterloo?
I don't hold Apple stock, but it's a hugely successful company and I admire success anywhere.
If I were an Apple investor though, I'd be a little worried.
Why?
Well I've noticed Apple is filing more lawsuits and - perhaps consequently - increasingly becoming a target itself.
I've taken a look at Apple's 10-K for its fiscal year ended September 2009. There are eight pages of lawsuits, and the list is about to get longer with Apple's latest salvo against Taiwanese company HTC. Some analysts have described this lawsuit as an "indirect" shot at Google, since HTC is a major partner with Google on the Android smartphone system.
No matter how big and successful a company is, lawsuits are always bad news. They distract management and even employees.
I know when you're at the top everyone's gunning for you. But Apple could become so mired in all these lawsuits that it starts to lose its focus, and it's "magical" edge. And if Apple loses its edge, it will become rotten. Maybe I'm wrong.
If I were an Apple investor though, I'd be a little worried.
Why?
Well I've noticed Apple is filing more lawsuits and - perhaps consequently - increasingly becoming a target itself.
I've taken a look at Apple's 10-K for its fiscal year ended September 2009. There are eight pages of lawsuits, and the list is about to get longer with Apple's latest salvo against Taiwanese company HTC. Some analysts have described this lawsuit as an "indirect" shot at Google, since HTC is a major partner with Google on the Android smartphone system.
No matter how big and successful a company is, lawsuits are always bad news. They distract management and even employees.
I know when you're at the top everyone's gunning for you. But Apple could become so mired in all these lawsuits that it starts to lose its focus, and it's "magical" edge. And if Apple loses its edge, it will become rotten. Maybe I'm wrong.
Friday, May 22, 2009
Bullish on Africa With AFK
A couple of weeks ago, I was still searching for a stock with which to play Africa.
Well, I finally got into AFK, which is an exchange traded fund (ETF) that tracks the Dow Jones Africa Titans 50 Index.
Now my portfolio is exposed to every nook and cranny of the world, and AFK constitutes 9% of the portfolio. Yeah, that's right...9%!
I got into AFK at $22 a piece, well before the stock crossed its 200-day moving average to the upside, which is always a bullish technical signal.
Here's Jim Cramer of CNBC's Mad Money show talking up AFK in the video below.
Yes, like Cramer said, over a quarter of AFK is weighted in South African stocks, but i have a feeling this will gradually change as the economies of smaller African countries kick into gear.
In fact, it has to change. Take a look the latest sector allocation for AFK, Banks, Basic Materials, Oil & Gas, and Telecoms dominate the list. Three of these sectors - excluding Basic Materials - are growing fastest not in South Africa but in other African countries. Therefore, at some point the fund will have to account for this faster growth in smaller countries.
As at the close of trading on May 22, 2009, I'm up almost 18% from my entry point into AFK, so I'm sitting pretty.
However, compared to other emerging market ETFs, AFK still has a long way to go in terms of year-to-date (YTD) returns.
Let's go Africa!
Well, I finally got into AFK, which is an exchange traded fund (ETF) that tracks the Dow Jones Africa Titans 50 Index.
Now my portfolio is exposed to every nook and cranny of the world, and AFK constitutes 9% of the portfolio. Yeah, that's right...9%!
I got into AFK at $22 a piece, well before the stock crossed its 200-day moving average to the upside, which is always a bullish technical signal.
Here's Jim Cramer of CNBC's Mad Money show talking up AFK in the video below.
Yes, like Cramer said, over a quarter of AFK is weighted in South African stocks, but i have a feeling this will gradually change as the economies of smaller African countries kick into gear.
In fact, it has to change. Take a look the latest sector allocation for AFK, Banks, Basic Materials, Oil & Gas, and Telecoms dominate the list. Three of these sectors - excluding Basic Materials - are growing fastest not in South Africa but in other African countries. Therefore, at some point the fund will have to account for this faster growth in smaller countries.
As at the close of trading on May 22, 2009, I'm up almost 18% from my entry point into AFK, so I'm sitting pretty.
However, compared to other emerging market ETFs, AFK still has a long way to go in terms of year-to-date (YTD) returns.
Let's go Africa!
Wednesday, May 13, 2009
Apple’s Excellent Customer Service Makes the Stock a Buy
I don’t have any Apple (AAPL) products yet, not even a "Pod". However, I do use iTunes, but that’s not a product, it’s a service.
Anyway, last week I had an issue with purchasing iTunes gift certificates online. Although there was no helpdesk number to call – something that’s now common practice with companies – I did get to “chat” online with a customer service rep who promised to follow up through email…and actually did!
Not only was there a follow-up email, dude went back and forth with me on email until he confirmed I was satisfied with the problem’s resolution. I thought to myself, that’s what customer service is.
Now, AAPL does make cool products, but I don’t think that’s the sole reason for the company’s success. Excellent customer service has to be part of the reason.
I know what you’re thinking. Maybe the dude who attended to me had just reunited with his high-school sweetheart. Nah. I think great customer service is just how AAPL rolls; it’s part of their mojo.
I’ve been in their store many times and “test-driven” like 10 different Pods and Macs without buying a thing, and none of their people gave me as much as a “beat it” look.
Look, if you want to know how well or awful a company is run, just experience its customer service. And Wall Street knows this. That's why the stocks of well managed companies often command a premium in the market. Just compare the price/earnings (P/E) ratio of AAPL with those of its competitors.
Costco (COST) is another company that enjoys a higher premium than its competitors partly because Wall Street believes it's better managed.
I have thought about buying some AAPL (no pun intended), but my portfolio is already tech heavy – it’s 18% weighted in tech versus S&P 500’s 15%.
Furthermore, I am not a fan of “hardware” tech stocks, because they are more susceptible to commodity prices than their “software” counterparts are. This doesn’t mean I won’t buy or use AAPL products though.
If you’re looking to get into a tech stock you should consider AAPL. I admit customer service is a crude way to decide whether to invest in a stock, but it seems to be an accurate predictor of a long-term moneymaker.
When deciding whether to get into a stock, some investors look at fundamentals, others look at technicals. Now you can go one up on them by also looking at customer service.
Anyway, last week I had an issue with purchasing iTunes gift certificates online. Although there was no helpdesk number to call – something that’s now common practice with companies – I did get to “chat” online with a customer service rep who promised to follow up through email…and actually did!
Not only was there a follow-up email, dude went back and forth with me on email until he confirmed I was satisfied with the problem’s resolution. I thought to myself, that’s what customer service is.
Now, AAPL does make cool products, but I don’t think that’s the sole reason for the company’s success. Excellent customer service has to be part of the reason.
I know what you’re thinking. Maybe the dude who attended to me had just reunited with his high-school sweetheart. Nah. I think great customer service is just how AAPL rolls; it’s part of their mojo.
I’ve been in their store many times and “test-driven” like 10 different Pods and Macs without buying a thing, and none of their people gave me as much as a “beat it” look.
Look, if you want to know how well or awful a company is run, just experience its customer service. And Wall Street knows this. That's why the stocks of well managed companies often command a premium in the market. Just compare the price/earnings (P/E) ratio of AAPL with those of its competitors.
Costco (COST) is another company that enjoys a higher premium than its competitors partly because Wall Street believes it's better managed.
I have thought about buying some AAPL (no pun intended), but my portfolio is already tech heavy – it’s 18% weighted in tech versus S&P 500’s 15%.
Furthermore, I am not a fan of “hardware” tech stocks, because they are more susceptible to commodity prices than their “software” counterparts are. This doesn’t mean I won’t buy or use AAPL products though.
If you’re looking to get into a tech stock you should consider AAPL. I admit customer service is a crude way to decide whether to invest in a stock, but it seems to be an accurate predictor of a long-term moneymaker.
When deciding whether to get into a stock, some investors look at fundamentals, others look at technicals. Now you can go one up on them by also looking at customer service.
5 Stock Market Tips to Make You A Smarter Newbie Investor
In investing, the most potent firearm to carry is knowledge. As you begin to invest in stocks, here are five tips to help you navigate the choppy waters of the stock markets:
1. Never invest in the market more money than you can afford to lose. Okay, so this is more a rule than a tip, but it’s probably the most important point to make about investing in stocks.
While you can make a lot of money investing in stocks, you can also lose big, though the chances of you losing big decrease the longer you stay invested in the market and the less frequently you trade.
If you are highly risk-averse, then it’s better to totally avoid the stock market. Stick to cash or money market instruments like certificate of deposits (CDs) and commercial paper.
2. Never invest in a stock unless you understand how the company makes money. If you’re going to hold a stock for a very long time, it pays to understand how the company makes money. This will help you make better buy and sell decisions – see tip 4.
To understand how a company makes money, you’ll probably have to read its Annual Report or 10-K. Another good way to get this insight is to listen in on a company’s earnings conference call, where stock analysts grill company executives about the strategy and financial health of a company.
3. Practice Dollar Cost Averaging (DCA) when building position in a stock. DCA is an investing strategy whereby you invest the same amount of money in a stock at regular intervals – like every week or month – regardless of the price of the stock when you buy it.
If you buy when the stock is trading high, you get fewer of the stock, and if you buy when the stock is trading low, you get more of it. Many online stock broking companies will automate this process for you.
DCA allows you to build a position in a stock at a pace or contribution level you are comfortable with. Furthermore, with DCA, you don’t have to “time” the market - to try to buy at a particular price.
Until you know what you’re doing, DCA is more reasonable than buying on “gut” feeling or buying because Jim Cramer said something good about the stock on Mad Money.
4. Buy on the rumors and sell on the news. This is a common adage among investors. Once you’ve built position in a stock to a level you’re satisfied with you may want to buy and sell some of it once in a while.
Studies have shown that when the market anticipates good news from a company - like a good earnings report - its stock price often starts to rise days before the news becomes official.
Therefore, you want to buy the stock once the rumor breaks. If you buy on the day the company delivers the good news, you’d probably miss out on much of the gains.
Traders, who typically don’t hold stocks for a long time, will often sell and take “profit” once the company breaks the good news. This is what investors mean by “sell on the news”.
If the market expects bad news, then don’t wait until the company breaks the news before you sell because by that time, the stock may have bled profusely.
Now, realize that your stock does not have to be the news-maker before you act. If you hold company A’s stock and Company B, a competitor, is the news-maker, then your stock is likely to react to company B’s news since they are in the same industry.
5. To get the best prices make your trades at the start or at the end of the trading day. The first and last 20 minutes or so of the trading day often witness the most activity by investors.
During the start of trading, investors try to capitalize on news before the opening bell, so the scramble to get in or out of a stock tends to make stocks “gap up” (price shoots higher than previous day’s high) or “gap down” (price shoots lower than previous day’s low) depending on the nature of the news.
Institutional investors often come into the market to trade during the quiet times - like lunchtime - or towards the end of the trading day.
The Learning Never Stops
Continue to arm yourself with knowledge and recognize that a "trader" is different from an "investor". A trader hits and runs while an investor buys and holds.
These days, however, most self-directed investors are not on the extremes. Sometimes they run like traders, and other times they walk like investors. Get in where you fit in.
1. Never invest in the market more money than you can afford to lose. Okay, so this is more a rule than a tip, but it’s probably the most important point to make about investing in stocks.
While you can make a lot of money investing in stocks, you can also lose big, though the chances of you losing big decrease the longer you stay invested in the market and the less frequently you trade.
If you are highly risk-averse, then it’s better to totally avoid the stock market. Stick to cash or money market instruments like certificate of deposits (CDs) and commercial paper.
2. Never invest in a stock unless you understand how the company makes money. If you’re going to hold a stock for a very long time, it pays to understand how the company makes money. This will help you make better buy and sell decisions – see tip 4.
To understand how a company makes money, you’ll probably have to read its Annual Report or 10-K. Another good way to get this insight is to listen in on a company’s earnings conference call, where stock analysts grill company executives about the strategy and financial health of a company.
3. Practice Dollar Cost Averaging (DCA) when building position in a stock. DCA is an investing strategy whereby you invest the same amount of money in a stock at regular intervals – like every week or month – regardless of the price of the stock when you buy it.
If you buy when the stock is trading high, you get fewer of the stock, and if you buy when the stock is trading low, you get more of it. Many online stock broking companies will automate this process for you.
DCA allows you to build a position in a stock at a pace or contribution level you are comfortable with. Furthermore, with DCA, you don’t have to “time” the market - to try to buy at a particular price.
Until you know what you’re doing, DCA is more reasonable than buying on “gut” feeling or buying because Jim Cramer said something good about the stock on Mad Money.
4. Buy on the rumors and sell on the news. This is a common adage among investors. Once you’ve built position in a stock to a level you’re satisfied with you may want to buy and sell some of it once in a while.
Studies have shown that when the market anticipates good news from a company - like a good earnings report - its stock price often starts to rise days before the news becomes official.
Therefore, you want to buy the stock once the rumor breaks. If you buy on the day the company delivers the good news, you’d probably miss out on much of the gains.
Traders, who typically don’t hold stocks for a long time, will often sell and take “profit” once the company breaks the good news. This is what investors mean by “sell on the news”.
If the market expects bad news, then don’t wait until the company breaks the news before you sell because by that time, the stock may have bled profusely.
Now, realize that your stock does not have to be the news-maker before you act. If you hold company A’s stock and Company B, a competitor, is the news-maker, then your stock is likely to react to company B’s news since they are in the same industry.
5. To get the best prices make your trades at the start or at the end of the trading day. The first and last 20 minutes or so of the trading day often witness the most activity by investors.
During the start of trading, investors try to capitalize on news before the opening bell, so the scramble to get in or out of a stock tends to make stocks “gap up” (price shoots higher than previous day’s high) or “gap down” (price shoots lower than previous day’s low) depending on the nature of the news.
Institutional investors often come into the market to trade during the quiet times - like lunchtime - or towards the end of the trading day.
The Learning Never Stops
Continue to arm yourself with knowledge and recognize that a "trader" is different from an "investor". A trader hits and runs while an investor buys and holds.
These days, however, most self-directed investors are not on the extremes. Sometimes they run like traders, and other times they walk like investors. Get in where you fit in.
Thursday, April 30, 2009
Africa On My Mind
Africa remains the only region I am currently not exposed to in any meaningful shape or form. I say meaningful because I do have a small exposure to South Africa and Egypt through the MSCI Emerging Markets Index Fund (EEM), which is one of my favorite holdings.
I don't want to be exposed to just one Africa country, so what I'm looking for is an Exchange Traded Fund (ETF) stock that covers several African countries. To this end, I've got the Market Vectors Africa ETF (AFK) on my watch list.
When I took a closer look at AFK, i realized it's heavily weighted in the fastest growing sectors of the continent, such as telecommunications and banking, which is a good thing.
At this point I'm yet to find another ETF similar to AFK in exclusivity to Africa, so right now it's in pole position to become the portfolio flagbearer for Africa. I shall decide soon.
I don't want to be exposed to just one Africa country, so what I'm looking for is an Exchange Traded Fund (ETF) stock that covers several African countries. To this end, I've got the Market Vectors Africa ETF (AFK) on my watch list.
When I took a closer look at AFK, i realized it's heavily weighted in the fastest growing sectors of the continent, such as telecommunications and banking, which is a good thing.
At this point I'm yet to find another ETF similar to AFK in exclusivity to Africa, so right now it's in pole position to become the portfolio flagbearer for Africa. I shall decide soon.
Monday, September 08, 2008
eBay Fees Were Killing Me So I Bought the Stock
The Chief Financial Officer (CFO) position at eBay should auction to the highest bidder, hopefully a linear programmer, because the company just cannot make up its mind how much to charge sellers for listing items. The latest ‘renovation’ of prices – the second of the year - happened about two weeks ago and takes effect on September 16. This time the firm cut the fees it charges sellers for fixed price listings.
I do more selling than buying on eBay. Therefore, I have often wondered if the CFO, or whoever is in charge of pricing, has a clue. I have been trading on eBay since 2005 and I don’t remember a year when there was no tweaking of seller fees. It has become an increasingly irritating ritual.
I guess eBay is trying to attract more buyers by encouraging sellers to list items at fixed prices, rather than letting buyers go at it via auction. However, eBay will cease to exist if it kills auctioning. Auction sales are what make eBay fun and enticing for sellers. A fixed price sale cannot give a seller the adrenalin rush of watching buyers snipe one another as an auction reaches a crescendo.
A related issue to listing fees is the “Final Value Fee (FVF)”, which is eBay’s cut on an item’s sales price. Try selling pricey items like gaming devices or multimedia storage devices and watch these fees snowball.
In 2007, I’d finally had enough of the incessant tweaking and bleeding fees and decided there was only one way to fight back: buy the stock. Dividends should soothe the pain of high sales fees. Yes, I know eBay, like many growth tech stocks, has never paid a dividend but that’s another matter. If you intend to trade on eBay for a long time, buying the stock is a good way to hedge against the tweaking and bleeding. If you do not intend to trade for long, eBay still is not a bad stock, so long as they have PayPal.
Friday, February 29, 2008
The Central Bank is Killing Us!
Unemployment or Inflation: Which is the better of these two evils? Put another way, if you were the governor of a Central Bank what would concern you the most: average Joe losing his job today - unemployment - or average Joe paying much higher prices for bread and milk tomorrow - inflation? That’s a tough one, isn’t it? Well, that’s the choice Federal Reserve Chairman (or U.S. Central Bank governor) Ben Bernanke and his posse of regional governors – collectively known as the Fed - have now faced for a year.
You would probably say it’s better for average Joe to pay a higher price for bread tomorrow than to lose his job today. Well, guess what. The Fed agrees with you, which is why it’s been cutting interest rates since September 2007. Lately, the Fed has got very aggressive on rate cuts and this is making me nervous. Chairman Bernanke reportedly has reduced interest rates faster than any Fed Chairman since 1982.
However, when the subprime slime started around this time in 2007 the Fed saw things differently. Back then, the Fed was more concerned about inflation than job losses and was more reluctant to cut interest rates. So what changed the mind of the Fed? I don’t know. Perhaps it’s politics, since it’s an election year. Whatever it is the Fed has blown it. It’s now trying to prevent a recession at the risk of higher inflation tomorrow. Big mistake.
Interest rate cuts fuel inflation by weakening the dollar and thus making imports more expensive. Rising oil and food grain prices, which the Fed cannot control, also fuel inflation. So hasn’t it noticed that oil is now over $100 a barrel and that the price of wheat, which is a principal ingredient in many food products, reached a record high last week? Gold, which is a natural hedge against rising inflation, is fast approaching a record $1,000 an ounce and the price of Silver is up almost 34% year-to-date (YTD), a run-up not seen since 1980. By the way, if you don't already have some commodities in your portfolio now is not the right time to buy.
Laugh Now, Cry Later
Maybe the Fed knows something the market does not but it seems to me we already have enough inflation coming our way. In 2007, inflation jumped 4.1%, reportedly the fastest pace since 1990. No wonder the price of milk at my local organic store has crept up. Why aggressively cut interest rates to put the economy on a K-leg only for inflation to crush it two or three years from now?
I think the Fed’s fear of a recession is misplaced. A mild recession today is better than hyperinflation tomorrow because inflation can do much more damage to the economy than a recession. Inflation can cause a recession but a recession cannot cause inflation. The recession this year probably will be short-lived because of the “economic stimulus” tax rebates the government just approved.
Even if consumers don’t spend the bulk of their rebates businesses will reinvest their tax credits, which will boost the economy and stave off a brutal recession. So the chances of average Joe being unemployed for a long time if he lost his job today are slim. However, if we get hyperinflation in a few years…..well, just look at what is happening with food prices in Zimbabwe. Even Wall Street fears inflation more than a recession.
Yes, I know the housing sector is bleeding and the lending department at your local bank won’t give you the time of the day even with good credit. However, it was the aggressive rate cuts by former Fed Chairman Alan Greenspan that partially caused this mess we’re in today. The inflation signal is now flashing red. The Central Bank should stop leading us to the slaughterhouse again with aggressive rate cuts.
Friday, November 09, 2007
Water Please, Not Coke!
Atlanta, Georgia, HQ for soft-drink giant Coca-Cola, made the headlines a few days ago for something that’s a harbinger of things to come for all cities around the world. It’s about to run out of water, literally. In fact, unless the city takes drastic action - read mandatory rationing - it may run out of potable water in a matter of months! Here’s the soundbite from Carol Couch, the director of the Environmental Protection Agency (EPA) Division in Georgia: “Without any intervention, we are likely to run out of water in three months." Well, that was about a month ago so…sure you know what I’m thinking.
Guess what? Georgia is not alone. Cities all over the Southeastern US are sounding the same alarm about the dearth of freshwater resources due to a sustained drought. Have you heard the one about Florida butting heads with Alabama and Georgia over Florida’s desperate attempt to draw water from a shared river basin?
Dry, Dry, West
Oh, don’t even talk about California and the dry, dry, west. They already have voluntary rationing in Long Beach, and the last I heard, city officials say they may have to go mandatory to wake people up. The Colorado River, which is the lifeblood of the Southwest, is drying up and with it freshwater supplies for millions of west coasters in California, Arizona, Nevada, Texas, and Utah.
Water War I
Wait a minute. This is not just an American problem. Egypt is ready to go to war with Sudan and Ethiopia over the River Nile. The Jordan River basin remains a flashpoint because it serves Israel, Palestine, Jordan, Syria, and Lebanon. The Chinese are fretting about how they’re going to meet the water needs of 1.5 billion people in 2050 and the UN says “tensions and disagreements over water are erupting along the Mekong River in Indochina as well as around the Aral Sea in Eastern Europe.” Many analysts have for years been predicting the next World War will be over water. That’s a scary thought.
Planet Saltwater
Okay, so you get the picture. Whether or not it’s global warming the world is facing acute water shortages. Therefore, as an individual investor how can you make money from the impeding water crisis. Well, remember Samuel Taylor Coleridge famous complaint that “Water, water everywhere, nor any drop to drink."
You see, the world is running out of freshwater supplies but we’re not running out of water. Actually, water covers about 97% of the earth’s surface. The only problem is that the bulk of this is saltwater, and around the world now, there are companies investing billions of dollars to make this saltwater potable for human consumption. You’d be wise to invest in these companies not now but right now.
Play it Safe
This “water services” space, which comprises companies that provide potable water, water treatment and other technologies and services related to water consumption, is poised for phenomenal growth. Companies that stand to benefit from this growth range from well-known names like GE (US) and Suez (France) to smaller companies from India, China, South Korea, Brazil, and so on.
The water services industry is primarily a high-growth, small to medium-cap space so it is better to play it through an index fund or Exchange-traded Fund (ETF), which are baskets of individual stocks of companies involved in similar businesses. It is too risky to play the sector with a single stock, say, GE, for two reasons. First, most of the companies do not derive all of their revenue from water services. Therefore, you’d be getting too much of what you don’t want with a single stock play. Second, the industry is very capital-intensive so you don’t want to put your money in just one firm in case it goes bust.
There are about four or five ETFs focused on the water industry but the manager personally is invested in the PowerShares Global Water Portfolio ETF (PIO), which currently holds 40 international stocks that generate at least 50% of their revenue from water or water-related services. PIO currently is the most international of the ETFs. Companies are added or removed from this fund regularly (rebalanced) to make sure they all meet the minimum 50% revenue requirement and thus remain focused on water services.
So talk to your broker or investment adviser about water. Invest in water now so when mandatory rationing comes to a town near you, it would not feel so bad to go without a shower for a couple of days!
Thursday, July 12, 2007
Shorts Slaughtered!
OMG! If there's any proof that it pays to be a long-term, buy-and-hold investor, today's action on the Street is it. It was a broad market rally, not just a Dow wow wow. The volume of stocks traded was also higher than usual, which gave today's surge some credibility and suggested there may be follow-up mini-rallies in the coming days.
Had you panicked and got out of the market on Tuesday when the indices tanked, then you are probably licking your wounds right now. And if you sold short Tuesday, thinking it's just going to be a summer of discontent as usual, then you are probably not going to have a good weekend.
Yes, the market often goes south in the summer but that doesn't mean it will always go down each summer. Besides, the manager's never really understood the whole "sell in May and go away" mantra. Okay, so maybe in the summer investors take more money off the table to get away from it all but I think it's a self-fulfilling prophecy that often accentuates normal market gyrations during the summer.
It works something like this: The summer is coming. Oil prices start to rise because summer is the peak driving season. Investors panic because they fear higher oil prices will hurt consumer pocketbooks. So investors start to take money off and hedgies and traders start to sell short big time. Corporate executives start to exercise options as their stocks bleed from all the selling. Investors get more panicky as executive sales could mean bad Q2 results and/or depressing forward guidance. So this induces more bloodletting. And so it goes.
However, as today's rally indicates, the market often defies gravity, which sends the shorts into a buying frenzy - and the market soaring - as they rush to cover their positions. So just like the manager never gets depressed about down days on the Street, the manager doesn't get euphoric about days like today. It all evens out in the long-term as the folio grows.
That said, if you must play the market short-term, the manager believes options - calls, puts, and their variants - offer a saner way to do this than short-selling, whether naked or not. It's even better when you play options on the stocks you hold long-term. That way, you don't have to borrow stocks to sell short. The bottom line, though, is that it pays to stay in the market long-term. Otherwise, when the proverbial tide goes out, you will be found out swimming naked.
Had you panicked and got out of the market on Tuesday when the indices tanked, then you are probably licking your wounds right now. And if you sold short Tuesday, thinking it's just going to be a summer of discontent as usual, then you are probably not going to have a good weekend.
Yes, the market often goes south in the summer but that doesn't mean it will always go down each summer. Besides, the manager's never really understood the whole "sell in May and go away" mantra. Okay, so maybe in the summer investors take more money off the table to get away from it all but I think it's a self-fulfilling prophecy that often accentuates normal market gyrations during the summer.
It works something like this: The summer is coming. Oil prices start to rise because summer is the peak driving season. Investors panic because they fear higher oil prices will hurt consumer pocketbooks. So investors start to take money off and hedgies and traders start to sell short big time. Corporate executives start to exercise options as their stocks bleed from all the selling. Investors get more panicky as executive sales could mean bad Q2 results and/or depressing forward guidance. So this induces more bloodletting. And so it goes.
However, as today's rally indicates, the market often defies gravity, which sends the shorts into a buying frenzy - and the market soaring - as they rush to cover their positions. So just like the manager never gets depressed about down days on the Street, the manager doesn't get euphoric about days like today. It all evens out in the long-term as the folio grows.
That said, if you must play the market short-term, the manager believes options - calls, puts, and their variants - offer a saner way to do this than short-selling, whether naked or not. It's even better when you play options on the stocks you hold long-term. That way, you don't have to borrow stocks to sell short. The bottom line, though, is that it pays to stay in the market long-term. Otherwise, when the proverbial tide goes out, you will be found out swimming naked.
Sunday, June 10, 2007
CNBC $M Challenge: Plenty Guts, Tough Glory!
The worst-known portfolio manager battled over a million other players in the CNBC Million Dollar Portfolio Challenge that ended May 25th. In the end the manager finished top 2% in the first round and was on track for a top 1% finish in the second round - results yet to be announced.
Anyway, CNBC, you outdid yourself with this challenge! Thank you for the 10-week "vocational training" course in trading.
Do you know how many traders and hedgies will have come out of this?!
I won the competition - against myself!
I look forward to the next edition. Big up CNBC!
Anyway, CNBC, you outdid yourself with this challenge! Thank you for the 10-week "vocational training" course in trading.
Do you know how many traders and hedgies will have come out of this?!
I won the competition - against myself!
I look forward to the next edition. Big up CNBC!
Tuesday, February 20, 2007
IPhone or Not, I Still Prefer Adobe to Apple
Ever since Apple (AAPL) announced it was getting into the smartphone business, many analysts have yapped about how the IPhone – or whatever it ends up getting called – will take competitors to the cleaners. PPPPleaseeee! I’m so tired of the claptrap that I feel compelled to offer my take on AAPL’s decision by revisiting my most favorite tech duel of the moment: ADBE vs. AAPL.
The duel is rooted in the early days of the folio. Back in October when I wanted to spice up the folio with a tech stock more volatile, relative to the S&P, than MSFT (Beta 0.71) but less so than EBAY (Beta 3.91) – ADBE (Beta 2.31) and AAPL (Beta 2.40) were the prime candidates on a list of 25 IT firms examined; yes, full-throttle Google was considered but I can’t quite see through the maze of how it makes money. Naturally, AAPL’s smartphone decision has prompted me to reexamine my allegiance to ADBE.
My Friend’s Enemy is……
Currently there are about one billion internet users around the world. But there are even more mobile phone users, reportedly 2 billion and growing faster than internet users. One of the major technological shifts currently afoot is the shift of desktop content and digital software to mobile devices. I’ve said before and I’ll say it again: ADBE has such a commanding share of the computer digital software market, ceteris paribus, that it’s better placed than many competitors to make a killing in this increasingly unwired world of ours.
Right now AAPL’s competition with ADBE is limited to the latter’s Creative Suite product, which includes the ubiquitous Flash Player. AAPL’s foray into smartphones could lead to more cooperation with ADBE, thereby building on existing software licensing partnerships. But the move is likely to bring more head butts with ADBE than kisses.
The adoption of Flash Lite technology, which is ADBE’s signature product for mobile devices, has been particularly strong over the past year. The firm announced last week that the number of Flash Lite enabled devices shipping worldwide has tripled since January 2006, to reach more than 200 million, most prominently in Japan as a result of a partnership with NTT DoCoMo. The Japanese lead the world in mobile phone technology so you know whatever “blows up” there usually takes off elsewhere. Sorry I digress for a New York minute.
The success of Flash Lite has been driven by ADBE’s key relationships with players like Nokia, Motorola and Samsung. These are the 400 pound gorillas AAPL will be going up against with the IPhone. I know AAPL’s reputation and success are built on market disruption but I have a feeling it’s about to bite more than it can chew.
A Good Swimmer in Shark-infested Waters
With a return-on-equity of about 25% - ADBE’s ROE is 14% - and strong brand recognition AAPL is a tempting stock. Macs are flying off the shelves and IPods keep getting more nanos, shuffles and whatever else. But is AAPL getting drunk off IPod juice? I mean, it may have 75% of the portable digital musical player market but the smartphone market is a much more competitive landscape.
Sony took the blowout by the IPod on the chin perhaps because it had other businesses to fall back on and it wasn’t a “do or die” with the Walkman. But the smartphone business is the bread and butter for pure players like RIM and Palm, and increasingly so for handset OEMs like Motorola, Nokia and Samsung. Actually, Samsung and LG Electronics have already unveiled “IPhone killers.” In fact, LG’s version uses ADBE’s Flash technology to enhance user experience. These firms will not lay the red carpet for AAPL.
Some have argued that AAPL intends to target the “high-end” of the smartphone market to avoid much competition. Well, what exactly is the “low-end” of the market? These phones typically retail for over USD500! AAPL is going to go from a market it dominates – portable digital music - to a market where it’s just another player. Its profit and operating margins are definitely going to come under pressure.
The smartphone business is definitely a growth area for IT firms with the right value proposition. But unless you are already a mobile hardware manufacturer, the best bet seems to be in software development and content creation for mobile devices. AAPL is going to find this out the hard way.
Watch Your Tech
Why not just hold both stocks and close shop? I guess I could but such a move will make the folio too overweight in tech stocks for my liking. More importantly, it will break my cardinal rule to keep the folio no more than 25% weighted in tech. To be a good investor one must exercise discipline no matter the temptation. Right now the folio is 24% weighted in tech – MSFT 16%, EBAY 3% and ADBE 5%; the S&P is 15% weighted in tech.
Cardinal rule aside, the bottom line is this: I see AAPL’s foray into mobile handset manufacturing as bearish for the stock. Just because one is a good warrior doesn’t mean one can fight any war!
The duel is rooted in the early days of the folio. Back in October when I wanted to spice up the folio with a tech stock more volatile, relative to the S&P, than MSFT (Beta 0.71) but less so than EBAY (Beta 3.91) – ADBE (Beta 2.31) and AAPL (Beta 2.40) were the prime candidates on a list of 25 IT firms examined; yes, full-throttle Google was considered but I can’t quite see through the maze of how it makes money. Naturally, AAPL’s smartphone decision has prompted me to reexamine my allegiance to ADBE.
My Friend’s Enemy is……
Currently there are about one billion internet users around the world. But there are even more mobile phone users, reportedly 2 billion and growing faster than internet users. One of the major technological shifts currently afoot is the shift of desktop content and digital software to mobile devices. I’ve said before and I’ll say it again: ADBE has such a commanding share of the computer digital software market, ceteris paribus, that it’s better placed than many competitors to make a killing in this increasingly unwired world of ours.
Right now AAPL’s competition with ADBE is limited to the latter’s Creative Suite product, which includes the ubiquitous Flash Player. AAPL’s foray into smartphones could lead to more cooperation with ADBE, thereby building on existing software licensing partnerships. But the move is likely to bring more head butts with ADBE than kisses.
The adoption of Flash Lite technology, which is ADBE’s signature product for mobile devices, has been particularly strong over the past year. The firm announced last week that the number of Flash Lite enabled devices shipping worldwide has tripled since January 2006, to reach more than 200 million, most prominently in Japan as a result of a partnership with NTT DoCoMo. The Japanese lead the world in mobile phone technology so you know whatever “blows up” there usually takes off elsewhere. Sorry I digress for a New York minute.
The success of Flash Lite has been driven by ADBE’s key relationships with players like Nokia, Motorola and Samsung. These are the 400 pound gorillas AAPL will be going up against with the IPhone. I know AAPL’s reputation and success are built on market disruption but I have a feeling it’s about to bite more than it can chew.
A Good Swimmer in Shark-infested Waters
With a return-on-equity of about 25% - ADBE’s ROE is 14% - and strong brand recognition AAPL is a tempting stock. Macs are flying off the shelves and IPods keep getting more nanos, shuffles and whatever else. But is AAPL getting drunk off IPod juice? I mean, it may have 75% of the portable digital musical player market but the smartphone market is a much more competitive landscape.
Sony took the blowout by the IPod on the chin perhaps because it had other businesses to fall back on and it wasn’t a “do or die” with the Walkman. But the smartphone business is the bread and butter for pure players like RIM and Palm, and increasingly so for handset OEMs like Motorola, Nokia and Samsung. Actually, Samsung and LG Electronics have already unveiled “IPhone killers.” In fact, LG’s version uses ADBE’s Flash technology to enhance user experience. These firms will not lay the red carpet for AAPL.
Some have argued that AAPL intends to target the “high-end” of the smartphone market to avoid much competition. Well, what exactly is the “low-end” of the market? These phones typically retail for over USD500! AAPL is going to go from a market it dominates – portable digital music - to a market where it’s just another player. Its profit and operating margins are definitely going to come under pressure.
The smartphone business is definitely a growth area for IT firms with the right value proposition. But unless you are already a mobile hardware manufacturer, the best bet seems to be in software development and content creation for mobile devices. AAPL is going to find this out the hard way.
Watch Your Tech
Why not just hold both stocks and close shop? I guess I could but such a move will make the folio too overweight in tech stocks for my liking. More importantly, it will break my cardinal rule to keep the folio no more than 25% weighted in tech. To be a good investor one must exercise discipline no matter the temptation. Right now the folio is 24% weighted in tech – MSFT 16%, EBAY 3% and ADBE 5%; the S&P is 15% weighted in tech.
Cardinal rule aside, the bottom line is this: I see AAPL’s foray into mobile handset manufacturing as bearish for the stock. Just because one is a good warrior doesn’t mean one can fight any war!
Friday, February 02, 2007
CostCo Flies Under the Radar in January
On Wall Street they say as January goes so does the rest of the year for the stock market – 85% of the time that is. Since the S&P ended January on a banger a blowout for stocks this year may be in the offing, if you happen to be in the right sectors of course. The folio is very diverse across sectors and market capitalizations so I’m assured a spot on any gravy train.
How much gravy I get to scoop is another matter. If January is any indication I’ve my work cut out for the rest of the year; on gains I ended January in the dog house:
Nasdaq 2.01%
S&P 1.41%
Dow 1.27%
Worst-known 1.06%
Is COST Riding the Minimum Wage Bill?
I support a higher federal minimum wage. It’s a well established fact that the federally mandated minimum wage, which has been stuck at $5.15 since 1997, hasn’t kept up with the rise in the nation’s productivity, much less with inflation – it should be about $6.75 as of January 2007 had it kept up with inflation. By 2009 Congress wants it to be $7.25, which is roundabout where it will need to be by then to keep up with inflation – assuming a 3% annual rate of inflation.
So what would Americans do with all this new money coming in? Since Americans hardly save the money is likely to be spent at consumer discretionary stomping grounds like CostCo.
Although COST has been trending higher since it broke a key resistance level back in October it didn’t really take off until the second week of January when economic data showed that the national average hourly earning rose more than expected. So it’s fair to say investors view rising hourly earnings as bullish for consumer discretionary stocks.
With Congress set to mandate a rise in the federal minimum wage I think COST is getting a minimum wage “bounce”. In January it had the biggest gain when measured by moving average (MA) of Returns to Date (RTD):
Change in MA of RTD (12/29/06 to 1/31/07)
COST +4.71%
NHP +3.60%
MSFT +2.28%
IWR +1.93%
PG +1.03%
IJR +0.51%
EFA +0.01%
EEM -0.83%
BAC -1.33%
ADBE -2.63%
PBW -2.88%
IGE -3.74%
EBAY -4.82%
SLV -8.74%
In December and January while many on the Street were fixated on techs it seems smart money was moving into discretionaries perhaps in anticipation of a rise in the minimum wage.
How much gravy I get to scoop is another matter. If January is any indication I’ve my work cut out for the rest of the year; on gains I ended January in the dog house:
Nasdaq 2.01%
S&P 1.41%
Dow 1.27%
Worst-known 1.06%
Is COST Riding the Minimum Wage Bill?
I support a higher federal minimum wage. It’s a well established fact that the federally mandated minimum wage, which has been stuck at $5.15 since 1997, hasn’t kept up with the rise in the nation’s productivity, much less with inflation – it should be about $6.75 as of January 2007 had it kept up with inflation. By 2009 Congress wants it to be $7.25, which is roundabout where it will need to be by then to keep up with inflation – assuming a 3% annual rate of inflation.
So what would Americans do with all this new money coming in? Since Americans hardly save the money is likely to be spent at consumer discretionary stomping grounds like CostCo.
Although COST has been trending higher since it broke a key resistance level back in October it didn’t really take off until the second week of January when economic data showed that the national average hourly earning rose more than expected. So it’s fair to say investors view rising hourly earnings as bullish for consumer discretionary stocks.
With Congress set to mandate a rise in the federal minimum wage I think COST is getting a minimum wage “bounce”. In January it had the biggest gain when measured by moving average (MA) of Returns to Date (RTD):
Change in MA of RTD (12/29/06 to 1/31/07)
COST +4.71%
NHP +3.60%
MSFT +2.28%
IWR +1.93%
PG +1.03%
IJR +0.51%
EFA +0.01%
EEM -0.83%
BAC -1.33%
ADBE -2.63%
PBW -2.88%
IGE -3.74%
EBAY -4.82%
SLV -8.74%
In December and January while many on the Street were fixated on techs it seems smart money was moving into discretionaries perhaps in anticipation of a rise in the minimum wage.
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