Good and Bad: Prices are Lower
Charles Del Valle on Jun 08 2010 at 9:45 pm | Filed under: Economics
Dear Strategic Investor,
There is good and bad in this market.
The good is that prices are lower so there are a lot of deals. The bad is that prices are lower, so you’re bound to catch a few losses.
But I don’t mind losses, as long as they don’t take over the portfolio.
That’s a big reason why we try and keep a 20% – 25% stop-loss on most of our positions – because we don’t want losses to overrun our portfolio.
And preventing losses is yet another reason why we like to sell our half our positions when the going is good – because it reduces risk.
Both of these things helped you immensely over the past few weeks.
There is no doubt that last week’s sell-off battered some of our positions. It even triggered some of our stop-losses. So without further ado, here are the positions you need to sell immediately…
- Wits Gold (WGR.TO) for a 33.3% gain. We sold the first half of this position on 10/8/2009. Our overall gain on both halves is 60.5%.
- Prospect Capital (PSEC) for a 21.8% gain. We sold the first half of this position on 2/2/2010. Our overall gain on both halves is 26.4%.
- PowerShares Global Coal ETF (PKOL) for a 1.7% gain. We sold the first half of this position on 2/2/2010. Our overall gain on both halves is 8.4%.
- Market Vectors Coal ETF (KOL) at breakeven. We sold the first half of this position on 2/2/2010. Our overall gain on both halves is 7.85%.
- Market Vectors Agri (MOO) for a 2.3% loss. We sold the first half of this position on 2/2/2010. Our overall gain on both halves is 5.75%.
- Swedish Grains ETF (GRU) for a 14.9% loss
- Money for Gold (MFGD.OB) for a 57% loss.
But today’s update isn’t all about selling and protecting against losses. It’s about spotting opportunity and pouncing on it.
Right now, there is a great opportunity to buy shares in Brazil at 20% or more discounts.
Typically, we have a 20%-25% stop-loss that applies to virtually all of our open positions. But we have a special place in our hearts for Brazil. Because we understand two things about this country…
1) It’s in a huge credit expansion. Lives are becoming better and more people are becoming rich middle-class citizens. This will be a boon for Brazil in the years ahead.
2) Brazil is still an emerging economy. That leaves it vulnerable to big swings in prices. These swings can often time take prices down by 25-50%.
So what do you do when a promising economy has shares that are 25-50% cheaper? You buy.
So now I’d like you to go ahead and buy into the following positions. Be aware, we are already in these positions. What we are trying to do here is simply average down and take advantage of the low prices while they last.
While you’re in the buying mood, I’d also like you to take advantage of the American tobacco company Altria (MO). Right now, the stock is offering a dividend of around 7%.
This is phenomenal, especially considering how steady Altria’s dividend payments have been for the last 40 years. $1,000 invested in Altria in 1970 would give you nearly a million today had you reinvested the dividends.
This would also complement Jim’s Brazilian tobacco play that you saw last week.
Well, that’s pretty much all for this week’s update. We’re simply trying to rebalance our portfolio by removing risk and buying deals so that you can take advantage.
Until next week,
Charles Delvalle
Co-Editor
Strategic Investment