I'm taking a go slow approach but my goal is to get my coal exposure near to my fertilizer exposure by the end of this commodities correction cycle. Our sector rotation continues away from commodities into "domestic companies" because clearly the economy will be picking up shortly. Or within 6 months. When this nonsense is over, people will go right back to the stocks that are being sold off today. It could be in a few days or a few weeks, hence I am not rushing in. We'll pick away here and there, and hope for continued selloffs - this will hurt performance short term but these are the names that will continue to be winners in 2nd half 2008 in my opinion. But for now there is no reason to argue it - the hedge fund computers say it's time to buy retailers, or domestic discretionary stocks - so as that avalanche of money flows from 1 sector to another - we are but gnats on the elephant's behind...
I've added to Arch Coal (ACI), Massey Energy (MEE) and Consol Energy (CNX) today. I threw one chart below, as you can see - we've had massive gains; and it's time to retrace, digest, and churn a bit before making the next big move later in 2008.
I'd added a touch to Cleveland Cliffs (CLF) an iron ore play for the same reasons. I am still hoping for bit lower prices in the fertilizer before adding, maybe this afternoon.
These purchases are still small in scale - $4-$6K variety. As I've been repeating, as long as this sector rotation goes on, we can expect more downside - I'll keep placing buys along the way, not hitting the bottom ... and I'll be selling someday down the road, never catching the top - but will continue to catch the "middle of these moves" and bank profits over time.
I think by mid May we'll see a rotation BACK to these names... maybe sooner. Until then we'll just tread some water and have to give back some gains... my 3% stake in housing stocks doesn't quite offset my commodity exposure ;)
Apple (AAPL) is the new Potash (POT)....
Long all names mentioned in fund; long Massey Energy in personal account
4 comments:
Hi Mark,
I've also begun to add bits and pieces of commodities today. (ATW and AGU) But they still look like we could get prices 10% lower. Regardless, of the sectors (ag, iron, coal, natgas, oil), do any have upcoming catalysts that might move the sector more than another? I liked the Ags because they had price increases coming, as with the iron ore co's.. but I think alot of that in the short term is priced in. That is, we won't be seeing more price bumps of major significance in the next little while. Perhaps still in iron ore... I find it interesting that those companies have not really corrected. CLF (save for today's action) did not pull back along with the others. And anecdotally, from the BUCY call, there was still chatter about steel prices and possible negotiations in that area. At least, that's how I interpreted it.
Catalysts will be meaningless. This is big money switching allocation. When they are done, they will switch back. The news flow will be insignificant. Just have to wait for the tide to reverse.
I agree with that.. but I'm thinking a little longer term. Say, 6 months. Which industry might outperform within the commodities arena? Do you think any of the various industries still have upside news? I'm thinking only iron ore does. That being said, the next commodities rally might not make significantly higher highs without a catalyst.
ag and coal
iron close 3rd
copper gold could drop 40% for all I know
problem is they are trading everything as a group, you can see in todays action. Every chart looks identical no matter what subsector.
I'm afraid same on the way up. Only gold separated early.
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