Author: Capital Ideas
Covestor model: Macro Plus Income Model and ETF Only Model
Disclosure: Long BALT, DNR, EMC, FXL, IYJ, IYW, JNK, KWK, MDY, NRGY, PDS, WY, XSD, MOO, MDY, XES, XSD
We continue to view the US markets as more attractive than those markets overseas. Therefore we have liquidated our foreign holdings such as the two Brazilian ETF’s: iShares MSCI Brazilian Fund (EWZ) and Market Vectors Brazilian Small Cap (BRF). We have also sold the iShares Emerging Markets ETF (EEM). While we believe domestic markets are the cheapest in the world, we remain mindful that Brazil is a high growth country. We believe Brazil remains attractive but will temporarily suffer from tighter credit and political uncertainty for the time being. As that situation resolves we will look to reenter investments in those markets.
Because we expect a sharp market correction we hold an unusually high level of cash. We plan to deploy that cash on significant market weakness. In the meantime we currently hold the following positions.
Reviewing those positions we continue to hold, we list the following:
MACRO PLUS INCOME MODEL
- BALTIC TRADING LTD. (BALT) Held for its growing yield.
- DENBURY RESOURCES (DNR) Under-recognized play on the Bakken & Niobrara shale
- EMC CORP. (EMC) Growth in storage and virtualization not fully priced in. Will add on weakness.
- FIRST TRUST TECHNOLOGY ALPHADEX (FXL) Holds most of the building block companies in the telecom equipment business.
- iShares DJ INDUSTRAIL SECTOR (IYJ) Holds most of the important machinery companies. It should do well if the export economy holds.
- iShares DJ TECHNOLOGY SECTOR (IYW) Holds a broad based group of tech companies. Plugs the holes not already covered.
- SPDR BARCLAYS HIGH YIELD BOND FUND (JNK) Holds the 100 most liquid high yield bonds. Plan to hold until long treasury yield exceeds 5%.
- QUICKSILVER RESOURCES (KWK) Could be a takeover target from private equity.
- SPDR S&P MIDCAP (MDY) Relative to the S&P 500, mid-caps continue to outperform. Will add on extreme weakness.
- INERGY LP (NRGY) One of the largest propane distributors, diversifying into underground storage. High and growing yield.
- PRECISION DRILLING (PDS) Growing fleet of high precision drilling rigs operating in the Bakken shale on both sides of the border.
- WEYERHAUSER (WY) Large timber REIT with growing yield .
- SPDR S&P SEMICONDUCTOR ETF (XSD) Holds many of the smaller semiconductor companies leveraged to wireless equipment.
ETF ONLY MODEL
- MARKET VECTORS AGRIBUISNESS (MOO) Holds most of the companies that are feeding the world.
- SPDR S&P MIDCAP (MDY) Holds the S&P mid-cap 400. Will add to on extreme weakness.
- SPDR OIL & GAS SERVICE TRUST (XES) Holds a good mix of O&G service companies. Should benefit as energy demand grows.
- SPDR S&P SEMICONDUCTOR ETF (XSD) Holds many of the smaller semiconductor companies leveraged to wireless equipment.
