Author: Joseph Agresti
Covestor model: China & India
Disclosures: None.
I am still confident that we will reach 1600 on the S&P 500 by the end of 2012. Greece is behind us, Japan is behind us, the “end of the world” is behind us – until it is in front of us again. I believe these are just pauses in a major up move which will conclude when a new president is elected in the United States.
We still have the debt ceiling hanging over the market, and when that is behind us the markets should move higher. All the market wants is clarity. All the uncertainty out there is holding down P/E values and those should expand with more clarity in the coming months.
Sadly, China and India are nowhere near investible at this point in time. I have been burned more times than I care to remember in the past year, and my performance tells the story. I actually consider this model being down about 40% since its 10/13/09 inception until the end of June 2011 an accomplishment, considering the rampant fraud and abuse that has taken place with US-traded Chinese equities the past year or so. There will be a time when this is behind us, but I will not go out on a limb and guess when that will be.
The companies whose CEOs take them private in leveraged buyouts are going to be the only ones worth owning, but by the time that is announced, well, there isn’t anything left to buy.
There is only one way to play the fraudulent world at this point – buy American companies who are doing more and more business in these areas.
My current favorite is GT Solar International, Inc. (NASDAQ: SOLR). Do you remember the saying “the only people who made money during the gold rush are the ones who sold the axes and the overalls?” That’s similar to what SOLR does – the company sells “axes” to the solar industry. 73% of its business comes from mainland China and over 90% comes from Asia. This is an American company based in NH and MA. I would consider SOLR fairly valued for a company that is not growing or in a declining industry. SOLR is neither, so I’m bullish on the position.
