Monday, December 4, 2017

We are moving

I moved the blog over to wordpress and will be blogging from this address going forward. Please continue to follow me at: Actionable Intelligence Alert

Tuesday, November 14, 2017

New article up on Seeking Alpha

I just wrote an article on a company I believe is poised to take advantage of the recovery I see happening in oil prices.

The name of the company is TMK Group and it is a oil field pipe manufacturer based in Russia. Although based in Russia they have operations in many other countries including the US.

As oil prices have risen recently the company is already experiencing a turn in its business. I have included this in the blog portfolio and I will continue to track it.

Link to article on Seeking Alpha

Saturday, November 11, 2017

Yoma Strategic Holdings raises $85 million in share placement for use in Myanmar business expansion

MMtimes.com:

Yoma Strategic, an affiliate of Yangon Stock Exchange-listed First Myanmar Investments Company (FMI), has successfully closed a placement of shares that will enable it to raise S$82.2 million in fresh funds in Singapore, where it is listed on the Mainboard of the Singapore Stock Exchange.

(skip)

The proceeds will be used to accelerate growth in the company’s core real estate, automotive and heavy equipment as well as consumer-related businesses. At least half of the S$82.2 million in proceeds after deducting fees and expenses will be channeled into Yoma Strategic’s real estate business. This includes the building of rental properties and development properties at Pun Hlaing Estate and StarCity as well as the further development of two Dulwich International Schools in Yangon.

Meanwhile, up to 20pc of the proceeds will be invested in the automotive and heavy equipment business, including capital expenditure for Yoma Fleet and New Holland tractors. The company is seeing high demand for its tractors and other heavy equipment from the Myanmar agriculture sector. During the recent July-September quarter, it sold 600 tractors under a contract with the Ministry of Agriculture and Irrigation (MOAI).It is due to deliver another 151 tractors to the MOAI.

The Group will also invest 15pc-20pc of the proceeds to expand its chain of KFC stores in Myanmar, where KFC is currently available in Yangon, Mandalay and Taunggyi. The company opened its 16th KFC store on September 30.

Yoma Strategic Holdings just keeps plugging along with the growing economy in Myanmar. My view on this company is that you just buy the shares and put them in a coffee can and check back in ten years. They will be worth multiples of what you paid for them.

The company is well run and has interests in various sectors of the Myanmar economy so it is capturing revenue from multiple sectors. The economy in Myanmar is growing from such a small base that it has literally decades of growth in front of it. So far I am up around 35% on this stock.

Thursday, November 9, 2017

Has uranium finally found a bottom?

It appears that way after this news from uranium mining giant Cameco.

Uranium investors have been desperately looking for a reason to be positive for a long time. They got that reason on Thursday when Cameco Corp. announced facility closures that will remove a large amount of the commodity from the market next year.

The Saskatchewan-based uranium producer’s decision to suspend production at its flagship McArthur River mine and the Key Lake milling operations in northern Saskatchewan for 10 months will lead to approximately 845 temporary job losses. However, the move is expected to provide a boost to a global uranium market that is forecast to be oversupplied by approximately 20 million pounds in 2018.

The market liked this news:


 These cuts by Cameco are on top of the cuts announced by Kazatomprom earlier this year to cut production of uranium in Kazakhstan, which is the largest producer in the world.

This is exactly the behavior we would expect to see in a market that is bombed. The price of uranium is so low that no one can make money at these levels. Conversely demand is still growing as China, India, and Russia continue to build new reactors. Cutting prodcution will bring supply into synch with demand.

In addition, recent elections in japan have allowed Prime Minister Abe to remain in power and he is a big booster of nuclear power and has stated that he intends on continuing restarts of reactors post Fukishima.

Other good news is that the French government has pushed out their goal of shutting down their nuclear reactors past 2035.

I have been wrong on the timing of a uranium price revival however it is obvious to me that with nuclear providing 11% of the world's electricity, and much more in certain countries, that the price has to go higher in order to incentivize capital to produce new uranium.

I bought (URA) today at the open.

Monday, November 6, 2017

Sold Vietnam Opportunity Fund (VCVOF)

I sold my shares in Vietnam Opportunity Fund (VCVOF) this morning. I am long term bullish on Vietnam because of its demographics and continued reforms by the government. Nevertheless, in this time of significant overvaluation I want to trim back on positions that have liquidity issues.

I was holding this position for a couple of years and using the ticker (VCVOF). There is not a whole lot of liquidity when trading the Vietnam Opportunity Fund under this ticker. If the markets experience a psychotic break and liquidity drys up it will be very difficult to get out of positions like this.

I will continue to watch Vietnam and after valuations correct I am sure I will be looking to re-enter the Vietnamese market.

I was able to pocket a 43% gain on this stock.

Friday, November 3, 2017

30 reasons Tesla is a bug in search of a windshield

Well written and thoroughly researched report on Tesla Motors and all of its problems. I am not a fan of Tesla or its lying and under performing CEO Elon Musk. This report details all of the issues that the company has and why it has a great chance of ending up insolvent.

The report also details other issues in the current electric vehicle hype. I think EV's have a great future but replacing 100% of internal combustion engines by 2040. It will not happen for several reasons; material supply, consumer preferences, sunk costs of fossil fueled vehicles, etc...

If you are interested you can read this 50 page report by clicking this link.

Wednesday, November 1, 2017

Egypt ETF definite technical breakout on improving fundementals

Egyptian stocks

As can be seen from the above chart the Egypt ETF (EGPT) has definitely broken out to the upside. I believe this upside breakout is the result of the continued improvements in the Egyptian economy. 

This is a case of a story going from terrible to less bad. It does not take much to get these frontier and emerging markets going but when they do I have seen some substantial gains.

Egypt remains a very speculative place to put money. Nevertheless, the economic reforms the government has implemented are taking affect and this is manifesting itself in higher stock prices. 

As long as the government can keep the reforms moving than I expect the economy to improve. In addition, the massive Egyptian offshore gas fields are now coming online which will provide additional fuel for higher stock prices. 

Slowly moving to the exits

The current stock market is way overvalued on just about every metric you look at. My firm belief is that the last eight years of stock market performance has been fueled by central bank bond buying.

As the central banks have been buying government bonds the money received by the bond sellers has to go somewhere. It is beyond obvious that this money has been flowing into stock markets.

As readers will already know I am a big advocate of the CAPE ratio as a way to determine overvaluation/undervaluation of various markets. I use this indicator to tell me what the expected returns on a market will look like over the next 10 years.

Currently the US market is at a CAPE of over 30 which is extremely overvalued. However, CAPE is not a market timing tool and is not used to tell you when to get out or into a market. What I am trying to say is that even though the market is overvalued it can get alot more overvalued (and probably will) before it goes down.

If I base the fact the the market has been fueled higher by central bank bond buying and liquidity creation the converse must be true. In fact, the Federal Reserve has been tightening rates for over a year and is expected to continue tightening rates going forward. In addition, they will no longer be rolling over maturing bonds into the purchasing of new bonds. This will lead to additional tightening of monetary conditions.

The above is definitely negative for stocks going forward. What is really beginning to worry me is that the public is now coming into stocks big time. I am beginning to see more and more articles and news about individual investors entering the stockmarket. They are purchasing ETF's mostly in the S&P 500. This is known as passive investing. This surge of new buying is leading to a blow off top in my opinion. I believe we are in this phase now.

Therefore I am beginning to sell off more speculative stocks and stocks that have lower liquidity. Raising cash now just seems safe. I look at speculating as a game of probabilities like poker or daily fantasy sports which I play. Those games like speculating are based on asking oneself what is the probable outcome of this hand/game based on the cards I am holding.

 I am not seeing a very high probability of long term stock market gains currently. All the risk seems to the downside. Or to use a poker analogy I have 2 and 7 off suit. Time to fold and wait for a better hand.

That does not mean that I am not speculating as there are some stocks that have some special situations that I believe will play out so I will be holding them. I will update this space as I sell off stocks from my portfolio.

I know I cant call the top but this definitely feels like we are closer to a top than a bottom. Be careful out there.



Tuesday, October 31, 2017

Alterra Power being bought by Innergex

Alterra Power:

Innergex Renewable Energy Inc. (TSX:INE) (“Innergex”) and Alterra Power Corp. (TSX:AXY) (“Alterra”) are pleased to announce today that they have entered into an arrangement agreement (the “Arrangement Agreement”) pursuant to which Innergex will acquire all of the issued and outstanding common shares of Alterra (the “Alterra Common Shares”) for an aggregate consideration of $1.1 billion, including the assumption of Alterra’s debt (the “Transaction”). 

The Transaction is subject to approval by Alterra’s shareholders and other customary closing conditions. Pursuant to the Transaction, Alterra shareholders will receive an aggregate consideration which will consist of approximately 25% in cash and 75% in common shares of Innergex (the “Innergex Common Shares”). The price of $8.25 per Alterra Common Shares implies a premium of 58% to Alterra’s 20-day volume weighted average price of $5.21 on the TSX as of October 27, 2017.

I do not know much about Innergex but I am going to go ahead and sell my shares in Alterra Power. This transaction is scheduled to close early next year and is based on 25% cash and 75% shares in Innergex.

A lot of things can happen between today and several months from now. The market is trading at all time highs this is a majopiruity stockk deal. I am taking a bird in hand and moving on.

This ended up being a 48% gain not counting some small dividends in a little over two years of holding.


Wednesday, October 25, 2017

Sanctions on Russia have created a boom in Russian agriculture

Market Mogul:

Combine harvesting grain


(snip)

While sanctions have setback Russia’s economy, they have surprisingly stimulated a renaissance for the country’s agricultural sector with Russian consumers turning towards their own domestic products. Andrei Guryev, chief executive of PhosAgro, has stated that “Russian agriculture is booming.” This boom is shown by Russian fisheries producing 664% more fish in the first half of 2017 than compared with last year.

(snip)

Jim Rogers, a US investor who owns shares in PhosAgro, believes that “The west is shooting itself in the foot. Sanctions were meant to hurt Russia, but Russian agriculture has benefited.” Stating further that “someone should tell the Americans to lift the sanctions now before there’s a gigantic, efficient, well-funded industry here.” The sanctions have signalled agricultural producers to invest for the long run.

The Russian stockmarket is one of my favorite markets for the nest five to ten years. With the oil price now recovering the Russian economy is poised to return to growth.

The sanctions were and are stupid. Nevertheless, they created a situation where Russian stocks are some of the cheapest stocks in the world, second only to Greece another favorite of mine.

Over the next ten years would you rather own the overvalued US market or the Russian market which is trading as one of the cheapest in the world. History says that mean reversion is coming for both markets. I suspect over the next ten years Russian stocks will outperform US stocks.

Read my essay on CAPE ratios for the logic behind the above statement


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