Don Coxe – Investment Recommendations (February 2011)
The February edition of Donald Coxe’s Basic Points research report (subtitled “The metals take centre stage”) has just been published. His investment recommendations, as summarized in this document, are listed in the paragraphs below, but I do recommend you also read the full report at the bottom of the post. (Also note that Donald’s weekly webcasts can be accessed from the sidebar of the Investment Postcards site.)
1. Despite their recent run-ups, long-reserve-holding base metals stocks remain very attractive.
2. If Egypt’s crisis is peacefully resolved, reduce precious metals stock exposure in commodity stock portfolios but retain these stocks in general equity portfolios as risk-reducers. However, the other commodity classes have superior short-term fundamentals if the global economic recovery continues and the uneasy peace in the Mideast holds.
3. Do not sell the Australian iron ore and coal producers’ shares because of the Noahan events there. Their earnings are obviously taking a hit, but the prices of their products have been driven sharply higher, and that means those earnings setbacks will be swiftly recouped. Besides, investors should have longer time horizons than what is needed to clean up after a flood. For investors who missed the big run-ups in those stocks, now is an excellent entry point.
4. Maintain a strong position within the agricultural sector, (assuming that you include the fertilizer stocks in that sector, rather than in your mining allocations). The Obama Administration remains impaled on fixation for ethanol, which means its minions in the Environmental Protection Administration will move forward in their plans to increase the ethanol allotments for gasoline blending. At a time of a global food shock, to be increasing the demand for highly-subsidized ethanol is immoral public policy. However, it is assuredly good news for the leading agricultural stocks.
5. The euro’s recent strength is probably unsustainable. Company treasurers should be borrowing in euros and bond investors should be wary of euro exposures.
6. Bond portfolios’ durations should be near benchmark levels. The time for extending durations because of an increased chance of a double-dip recession in Europe and/or the US, would also be a time for loading up on gold.
Source: Scribd, February 2011.
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