Update December 6, 2008 – Looking back on my previous post, what a change the market has taken. If you stayed long RSX and INFY and CCJ and C you would have lost a lot of money, but if you kept your portfolio hedged with the double-short Dow ETF, DXD, you would be ok.
Citi over 20 by year end? No way, maybe above 6?
Now…continue to maintain short hedges, but I am keeping close to market neutral.
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The US equity markets are in a pickle. The economy is souring, inflation is not contained, and the price of oil is quite volatile.
My suggestions: Keep your equity in strong select companies that will weather and profit in the coming year and hedge your portfolio by shorting the Dow.
I suggest purchasing DXD for 2x the inverse performance of the Dow-30 – this is essentially shorting the dow with 2x leverage. I have been short the Dow since the start of June and have kept my portfolio flat to +1-3% over the last few volatile weeks. I am not ready to remove my market short yet, but will do so when i think the markets will start to recover.
Where I am long (and why):
RSX – Economy is performing strongly, record rise in oil prices is bringing in huge amount of $$ into the country and this will trickle down into all industries and positively affect the economy
HMIN – valuation at 14x is attractive given its very very strong growth projections. This company is taking advantage of a cultural change in China. More people are traveling for business and pleasure. More people will be staying in hotels/motels. HMIN is rapidly building out cheap efficient business hotels/motels. Whats not to love. China’s GDP could remain flat and there will still be a change in the way people live which will benefit HMIN
INFY – I used to be much more bullish on this, now I am neutral to slightly positive. Outsourcing will continue in many international countries. It will also pick up in India as domestic companies there take advantage of the knowledge and experience built up by the international BPOs.
CCJ – Nuclear energy is our only feasible energy solution at the moment. Demand will significantly increase. Supply of Uranium wont catch up. Prices will rise. Cameco is the largest miner of Uranium. Simple
and you might think I am crazy for this one….
C (call options) – I think we will see stock back up over 20 by end of the year…this is pretty speculative
Thoughts?
