Opportunities in the market

[Patmo]

I didn't know where to post this, forgive me if it's the wrong place. Is it just me or has there been a lot of attractively-priced securities lately in the marketplace? It seems like every week I discover a new interesting stock investment candidate. It's pretty exciting but also pretty difficult to keep up, even with just sticking to surface level analysis 20/80-style...

 

I find that true especially in commodities. It's like there's a potential stock or 2 to invest into in every single commodity as all their prices are in the dumpster... I don't expect them all to recover eventually but it can't stay like this forever for all of them, either.

 

Here's a short list of things I'm thinking about or own in commodities, not all inclusive but mostly:

MND (gold/silver/antimony)

MCR (oil/natgas service)

KRN (potash)

INP (canola)

CNX (coal/shale)

 

There are also attractive potential candidates outside of commodities. It's like if a little something goes wrong, the market immediately and unceremoniously throws the stock straight into the trash can. Feel free to share some current exciting candidates if you have any!

 

 

 

 

[TwoCitiesCapital]

I didn't know where to post this, forgive me if it's the wrong place. Is it just me or has there been a lot of attractively-priced securities lately in the marketplace? It seems like every week I discover a new interesting stock investment candidate. It's pretty exciting but also pretty difficult to keep up, even with just sticking to surface level analysis 20/80-style...

 

I find that true especially in commodities. It's like there's a potential stock or 2 to invest into in every single commodity as all their prices are in the dumpster... I don't expect them all to recover eventually but it can't stay like this forever for all of them, either.

 

Here's a short list of things I'm thinking about or own in commodities, not all inclusive but mostly:

MND (gold/silver/antimony)

MCR (oil/natgas service)

KRN (potash)

INP (canola)

CNX (coal/shale)

 

There are also attractive potential candidates outside of commodities. It's like if a little something goes wrong, the market immediately and unceremoniously throws the stock straight into the trash can. Feel free to share some current exciting candidates if you have any!

 

Yes. That is what tends to happen when stock valuations are extended. If you're priced for perfection, and don't execute perfectly, your shareholders are in for a rough ride. More stocks are hitting 52 week lows than are hitting 52 highs. The market is basically being carried by the performance of Apple, Google, Netflix, Amazon, and one or two others. The remainder is basically in the dumps. This could be a sign that the bull market is just about over.

 

That being said, commodities have been in a 4-5 bear market which explains why many of the companies in that complex are cheap. Many are facing the possibility of bankruptcy, but I don't disagree with your assessment that they are cheap and have been picking up names in energy, coal, and metals.

 

 

[DTEJD1997]

Oh where to start?

 

Yes, there are certainly some interesting opportunities in this market!

 

I would add the BDC's!  There are some real bargains here, that pay tremendously high dividends.  HOWEVER, you've got to pick & choose.  There are also some real turkeys.

 

What about dry bulk shipping?  I sold out of GLBS at close to a 50% loss.  The company then went on to lose 70% in a couple of months.  GLBS is certainly not the only one...

 

What about retailers?  Look at SSI...

 

What about oil service companies?  AWLCF is one that I own.

 

What about Chinese companies?  DSWL, and EPETF are two that I own.

 

Any others that somebody might suggest?

[Guest Schwab711]

European companies with a large % of sales/profit in the US. If USD ever depreciates, companies like Bic or L'Oreal will see huge sales/earnings growth.

 

Also, foreign oil majors or the Canadian E&Ps look extremely interesting, depending on your risk tolerance, partially for the same reason. I generally dislike commodity companies but foreign E&Ps specifically have a lot of potential tailwinds imo.

[netnet]

European companies with a large % of sales/profit in the US. If USD ever depreciates, companies like Bic or L'Oreal will see huge sales/earnings growth.

 

???

When the dollar depreciates, the US portion of European companies'  sales and profits go down on a EUR basis plus their goods become more expensive to US consumers, precisely the problem that many US multinationals are having now.

[Guest Schwab711]

European companies with a large % of sales/profit in the US. If USD ever depreciates, companies like Bic or L'Oreal will see huge sales/earnings growth.

 

???

When the dollar depreciates, the US portion of European companies'  sales and profits go down on a EUR basis plus their goods become more expensive to US consumers, precisely the problem that many US multinationals are having now.

 

You are right, but in general I'm probably not interested in the types of businesses where FX is highly correlated to their market share. I was looking at it from the other side. Strong demand for products that have inelastic demand, stable volume, and large market shares. Even though the EUR has depreciated considerably, Bic and L'Oreal's US businesses have not improved proportionally. You can only sell so many lighters (unlike Nestle, whose US business has benefited from FX moves). I added the qualifier of US sales because I like the US's prospects more than anyone else going forward and if I wanted to bet solely on currencies I'd do that. I want to have a position in these businesses anyway, it just seems like i have potential tailwinds from here. Here's my thought process:

Assumptions:

* 25-50% of sales in US

* US sales/profits unaffected by FX movements

* Companies I'm interested in have manufacturing (COGs) in same currency as sales for every non-trivial market they are in

 

Let's pretend the EUR/USD moves 10% in favor of EUR (we should also assume there is a reason for this FX move - though there's too many potential causes to get into specifics).

* US profits are worth -5% to -2.5% in EUR (important to have dominate market share so competitors don't creep - USD appreciation over past years should mean new competition will not be quick to form)

* My dollar-denominated purchase of shares is +10% (hopefully)

Overall, up +5% - +7.5% (assumes zero growth for non-US businesses even though they have supposedly become more competitive - the cause of the FX adjustment)

 

If I'm wrong and USD continues to appreciate (EUR/USD is -10% from here):

* US sales are a buoy and competitive advantage in my favorite market is enhanced

* US sales/profits up 2.5% to 5.0%

* US and non-EU advantage is further entrenched

* Overall loss is the mirror image equal to -7.5% to -5%

 

So if I think the above cases are no longer 50/50, I have a tailwind.

 

Of course, this same argument could be made at any point, which is why I'd like to hedge my bet with a US business that lowers both my risk and reward.

[Guest Schwab711]

My prior post is from the POV of an American.

 

Currency movements are generally not random so you have the opposite problem with Candian E&Ps, right? If the CAD strengthens, we can probably assume that oil has moved up. So, Canadian E&Ps are more leveraged for an American investor than a Canadian. However, any recovery in oil will likely treat American investors to huge gains (stock move * (1+ FX)). It's free leverage only because FX moves have been so violent the last few years.