Welcome to the first issue of the Value Investing and Commodity Bull Market Newsletter. The purpose of this newsletter is to identify undervalued and overlooked investment opportunities. It applies the ideas of Marc Faber, Jim Rogers, and David Morgan to discover good investment opportunities in stocks and futures.
This newsletter will have a top-down as well as a bottom-up approach. Currently I am bullish on commodities and Asia in the long term. Within those sectors I will discuss stocks and futures that appear to be a good value and haven't already appreciated as much as other commodity and Asian investments.
One of the reasons I'm writing this newsletter is to get feedback on other investments that offer good values, so if you know of any, send me an e-mail at comments@tjmather.com. Thanks.
Marc Faber has written an article titled "A more cautious approach toward Asia and commodity prices". While Faber is bullish in the long term on commodities and Asia, he is more cautious in the short term as these sectors have gone up a lot this year and may be due for a correction soon. In this newsletter we will discuss some overlooked investment opportunities that haven't gone up as much as other commodities and Asian equities.
* = I own shares/future contracts
* XEC - Cimarex Energy. US based independent Natural Gas explorer and producer. Unhedged and low P/E. Analyst report available here http://www.mcdep.com/xec31013a.pdf
* NXY - Nexen Inc. Canada based global oil explorer and producer. Strong revenue and earnings growth, low P/E.
* TNT - AO Tatneft - Russian oil producer, extremely large reserves/market cap ratio. Very heavily discounted b/c of Russian political risk. Perhaps rightly so - Jim Rogers is bearish on Russia.
* PTR - Petrochina - Oil exploration and production in China, Warren Buffett recently purchased a large stake in this company.
* BHP - BHP Billiton - Diversified Natural Resources company based in Australia. Has many projects around the world in mining and energy. They sell a lot of stuff to China, so good way to play China's economic growth.
Purchasing silver directly probably offers the best value, since it hasn't gone up as much as the mining stocks. There are many ways to buy silver, including futures, bullion bars, comex receipts, junk coins, etc. Kazvestor has an excellent write up on silver here: http://www.minersmanual.com/silverarticle.php?SA_ID=93
* TLK - PT Telekomunikasi Indonesia - Indonesia Phone Services, very low P/E.
* Long Silver - Rather than go into all the reasons I'm bullish on silver here, I would recommend checking out some of the excellent articles at http://www.minersmanual.com/silvernews.php Silver trades both in 1,000 and 5,000 ounce contract sizes.
* Long Palladium - This is a trade based on the large spread between platinum and palladium, as well as the increasing demand for PGMs. See: http://tjmather.com/extreme_value/palladium.shtml Investing in palladium futures should offer a better value than investing in palladium miners such as PAL, SWC, and NILSY.PK since these stocks have gone up a lot recently. Note that Palladium is very volatile, so beware!
Short Japanese Government Bonds - Marc Faber recommended a short on the JGB in his June Newsletter when ten year yields where around 0.60%. See http://www.gloomboomdoom.com/!gbdreport_samples/GBD0306.pdf (Pages 14-16). The 10 year mini-JGB futures trade on the Singapore Exchange, and the larger 10 year JGB futures trade on the Tokyo Exchange. The ten year yield has risen since Marc Faber's recommendation to around 1.30%, so judge for yourself if this is still a good short opportunity.
Starting value $200,000 cash At market open on Monday, November 17th, 2003, the model portfolio would execute the following trades: Buy 200 WGR Buy 400 XEC Buy 200 NXY Buy 200 TNT Buy 200 PTR Buy 200 BG Buy 200 FDP Buy 400 NRD Buy 500 BHP Buy 700 WTZ Buy 500 CHL Buy 400 TLK 1 Long COMEX Silver December 2006 (approx $29k contract size) 1 Long NYMEX Palladium June 2004 (approx $20k contract size) 1 Short SIMEX 10-year mini-JGB December 2003 (approx $122k contract size)
This information is not intended as a solicitation for any company. Commodities, and in particular future investing, is very risky. Most traders lose money by investing in futures, due to the high leverage that they offer. You should not invest in futures unless you know what you are doing.
This report may be copied, and transmitted by other people, as long as it is copied in its entirety.
I have not received any compensation from any company for writing this newsletter, neither cash, nor shares, nor options, nor any other sort of compensation.