For the time being, running a model portfolio with actual stock selections is a project best put on hold. I'll be producing radio programing starting this month and any possible compliance issues need to be ironed-out.
In the meantime, we'll begin posting here again on a more regular basis. It will be nice to blow the dust out of this place and return to highlighting important developments.
All the best,
Eric Dubin and the Investor Intelligentsia team.
Wednesday, December 31, 2008
Welcome 2009 - Glad To See You
By any measure, 2008 was a momentous year for investors. While great uncertainty remains as we look forward, we believe the probability for a reasonably strong stock market performance during the first two months of 2009 is high -- albeit with continued volatility.
Given the carnage endured with market positions, tax loss selling is the best strategy to employ. We have thus closed the model portfolio. Nearly all of the positions, however, remain attractive given the strong fundamentals enjoyed by each company. We will return to profiling some of these companies and many others in the weeks and months ahead. At some point in the future, we might open another portfolio as an education tool. For now, however, strategies with the existing portfolio are limited.
Analysis and editorial will be forthcoming in the year ahead.
Wishing you all the best in 2009,
Eric Dubin and the Investor Intelligentsia team
Given the carnage endured with market positions, tax loss selling is the best strategy to employ. We have thus closed the model portfolio. Nearly all of the positions, however, remain attractive given the strong fundamentals enjoyed by each company. We will return to profiling some of these companies and many others in the weeks and months ahead. At some point in the future, we might open another portfolio as an education tool. For now, however, strategies with the existing portfolio are limited.
Analysis and editorial will be forthcoming in the year ahead.
Wishing you all the best in 2009,
Eric Dubin and the Investor Intelligentsia team
Monday, June 16, 2008
Composite Technology Corporation: Wind Power And Grid Infrastructure "Multi-bagger" Potential
This week we're going to add Composite Technology Corporation to the Investor Intelligentsia Model Portfolio. At one point, the company had a much wider following among institutional and retail investors. The stock got way ahead of the company's ability to execute and subsequently crashed. But there's gold in the shares of this fallen - somewhat scruffy - angel. The best news? Very few people have been paying attention to the company's newfound momentum and the stock represents an outstanding buy with very high odds of pulling off at least 100% share price appreciation in under 18 months.
The company has two principle business divisions: CTC Cable and DeWind. The cable segment specializes in the development of aluminum conductor composite core (ACCC) conductors for use in electrical grid infrastructure. Aluminum costs less than copper, but it presents a number of challenges for long-distance transmission lines. Peak electrical loads can result in physically hotter temperatures. Standard cables can sag under these operating conditions. Pure aluminum is also less effective than copper as an electric conductor.
The ACCC design incorporates a core of ceramic fiber-reinforced aluminum wrapped in aluminum-zirconium wires. The design boosts transmission efficiency and distance capabilities, while lowering system-wide materials cost. The company's contract momentum in China is impressive, and interest in other countries is on the rise.
Composite Technology Corporation's DeWind division was acquired in July, 2006. DeWind has outstanding turbine technology, and a history of technical excellence in Germany. Their older turbines have an installed base of over 580 units worldwide, mostly comprised of the 1.25 megawatt capacity D6 model. In the near-term, we believe the new D8.2 turbine has excellent opportunity to win large contracts for 2009 and beyond. The company has partnered with TECO Westinghouse in Texas for mass production, a major strategic leap forward for the company. Order flow could suddenly leap into the hundreds of millions of dollars within a year, should the company prove the capability to execute mass production. Our research suggest the company is on track.
Institutional investors are also taking a fresh interest. Credit Suisse owned 4% of Composite Technology Corporation from previous investment. On May 9, 2008 the company announced it had sold an additional $10 equity stake to Credit Suisse, and an option until June 30th for a further $40 million. While we can't be sure at this juncture, we see no reason why Credit Suisse will not make the additional $40 million investment.
Composite Technology Corporation trades with a market capitalization of roughly $260 million. On a trailing twelve month revenue basis given the momentum in their cable business, the stock trades at 4.7 times revenues. While this isn't cheap by conventional valuation metrics, it represents profound value in the alternative energy space, particularly when it looks like CTC is well on it's way to securing deployment contracts for the D8.2 wind system.
Before the open we will establish a limit order to purchase 17,000 shares at $1.07. We will write more about the company in the near future. The company trades on the over the counter market in the Unites States. On Yahoo Finance, the ticker is CPTC.OB
For more information, we suggest the following initial sources:
The company has two principle business divisions: CTC Cable and DeWind. The cable segment specializes in the development of aluminum conductor composite core (ACCC) conductors for use in electrical grid infrastructure. Aluminum costs less than copper, but it presents a number of challenges for long-distance transmission lines. Peak electrical loads can result in physically hotter temperatures. Standard cables can sag under these operating conditions. Pure aluminum is also less effective than copper as an electric conductor.
The ACCC design incorporates a core of ceramic fiber-reinforced aluminum wrapped in
Composite Technology Corporation's DeWind division was acquired in July, 2006. DeWind has outstanding turbine technology, and a history of technical excellence in Germany. Their older turbines have an installed base of over 580 units worldwide, mostly comprised of the 1.25 megawatt capacity D6 model. In the near-term, we believe the new D8.2 turbine has excellent opportunity to win large contracts for 2009 and beyond. The company has partnered with TECO Westinghouse in Texas for mass production, a major strategic leap forward for the company. Order flow could suddenly leap into the hundreds of millions of dollars within a year, should the company prove the capability to execute mass production. Our research suggest the company is on track.
Institutional investors are also taking a fresh interest. Credit Suisse owned 4% of Composite Technology Corporation from previous investment. On May 9, 2008 the company announced it had sold an additional $10 equity stake to Credit Suisse, and an option until June 30th for a further $40 million. While we can't be sure at this juncture, we see no reason why Credit Suisse will not make the additional $40 million investment.
Composite Technology Corporation trades with a market capitalization of roughly $260 million. On a trailing twelve month revenue basis given the momentum in their cable business, the stock trades at 4.7 times revenues. While this isn't cheap by conventional valuation metrics, it represents profound value in the alternative energy space, particularly when it looks like CTC is well on it's way to securing deployment contracts for the D8.2 wind system.
Before the open we will establish a limit order to purchase 17,000 shares at $1.07. We will write more about the company in the near future. The company trades on the over the counter market in the Unites States. On Yahoo Finance, the ticker is CPTC.OB
For more information, we suggest the following initial sources:
Visit their website: compositetechcorp.com Review their presentation at the Jefferies Global Clean Technology Conference (click here for PDF)
Be sure to enter your email address on the upper right corner of the Investor Intelligentsia website for free alerts when we publish. We don't spam. We don't sell addresses. Our service is free and we respect your privacy, your trust, and your interest in our educational enterprise
Monday, May 19, 2008
Portfolio Update: Upping Energy, Technology and Base Metals
Greetings Investor Intelligentsia readers! Today, we will deploy a large portion of our cash. We will add positions in energy, base metals, and technology.
Oil Over $200? Not If, But When
Oil and natural gas prices have moved substantially higher. But exploration, production and service company stocks are trading as if the prevailing level of oil was commensurate with the $80 to $90 range for West Texas Intermediate Crude. Contrary to arguments frequently aired in mainstream media, this is not a speculative bubble. Oil will continue to surprise to the upside for the balance of this year.
It's normal to see producers and service company stocks lagging behind the underlying prices of oil and natural gas. This is a pattern we've seen throughout the entire bull market. Analysts and investors battle cognitive dissonance in the face of our inexorable energy crisis. Six months from now, current prices for exploration, production and service companies will be seen as bargains.
We're moving through what is commonly known as the "shoulder season," a time when energy demand is supposed to be seasonally weak. But rather than a brief respite before the North American driving and air conditioning season shifts into full gear, energy prices have done nothing but move higher. World demand runs at between 86 and 87 million barrels of oil equivalent per day and supplies barely match demand. Spare capacity is trivial, and entirely predicated on heavy, high sulfur oil which the world lacks spare refining capacity to process, along with natural gas condensates and refinery gains. World production of light sweet crude peaked in 2005 and it is only now that Wall Street is coming to terms with the fact that capacity gains are of lesser quality.
Oil's move comes as no surprise to us. We were on record early this year forecasting the current price level and beyond. The bottom-line is that the world is starting to come to terms with the phenomena commonly referred to as "peak oil." Wall Street number crunchers are now framing analysis to incorporate decline rates, spare capacity, supply and demand concepts in terms of flow rates per day and the challenges associated with the ramp of new oil production. They're starting to see the big picture and 2008 will see some of the sharpest gains yet in the energy bull market.
Natural gas should outperform oil over the next three to nine months. Chesapeake Energy Corp. and XTO Energy will directly benefit. Nabors Drilling has recently spiked on the back of firming natural gas prices. The stock lagged the service industry in general while North American natural gas drilling underwent a long inventory correction. The stock has much more room to run and trades at a low valuation relative to peak cycle earnings potential.
With other energy purchases, we're going to pick up shares of Petrobank. The stock offers exposure to Canadian oil sands, complimenting our large position in Encana. The company will also benefit as the recent excitement over the Bakken Oil Shale deposit spreads to Canada. Finally, we will increase our services industry exposure with diversified services provider Weatherford International and additional shares of Transocean, the single best value in the industry. Brazil recently announced they have locked-up 80% of the world's deep water drilling capacity in long-term contracts. The industry will be astounded by how long this cycle will run. Forward earnings estimates for Transocean have a long way higher to move - particularly for years 2010 and beyond.
Technology Catching A Bid; Global Economy Not Tanking
We're adding shares of Intel and Nokia to the portfolio. In our view, Nokia just hit a bottom and we're fearlessly going after the falling knife. Key supplier Texas Instruments reported favorable inventory trends and Nokia's shares have fallen to the point where they represent sound value in telecom. Many areas in the semiconductor space have turned around nicely, and are showing signs that the inventory overhang will be worked down. Our entry with ANADIGICS and Broadcom were superbly timed and while Intel will be a far more boring position, there's a time and a place for "boring."
Finally, we're adding shares of Brazilian base metals mining giant Valle - something we should have done months ago, but nevertheless the shares are still attractive
At the open, we will establish the following positions:
Oil Over $200? Not If, But When
Oil and natural gas prices have moved substantially higher. But exploration, production and service company stocks are trading as if the prevailing level of oil was commensurate with the $80 to $90 range for West Texas Intermediate Crude. Contrary to arguments frequently aired in mainstream media, this is not a speculative bubble. Oil will continue to surprise to the upside for the balance of this year.
It's normal to see producers and service company stocks lagging behind the underlying prices of oil and natural gas. This is a pattern we've seen throughout the entire bull market. Analysts and investors battle cognitive dissonance in the face of our inexorable energy crisis. Six months from now, current prices for exploration, production and service companies will be seen as bargains.
We're moving through what is commonly known as the "shoulder season," a time when energy demand is supposed to be seasonally weak. But rather than a brief respite before the North American driving and air conditioning season shifts into full gear, energy prices have done nothing but move higher. World demand runs at between 86 and 87 million barrels of oil equivalent per day and supplies barely match demand. Spare capacity is trivial, and entirely predicated on heavy, high sulfur oil which the world lacks spare refining capacity to process, along with natural gas condensates and refinery gains. World production of light sweet crude peaked in 2005 and it is only now that Wall Street is coming to terms with the fact that capacity gains are of lesser quality.
Oil's move comes as no surprise to us. We were on record early this year forecasting the current price level and beyond. The bottom-line is that the world is starting to come to terms with the phenomena commonly referred to as "peak oil." Wall Street number crunchers are now framing analysis to incorporate decline rates, spare capacity, supply and demand concepts in terms of flow rates per day and the challenges associated with the ramp of new oil production. They're starting to see the big picture and 2008 will see some of the sharpest gains yet in the energy bull market.
Natural gas should outperform oil over the next three to nine months. Chesapeake Energy Corp. and XTO Energy will directly benefit. Nabors Drilling has recently spiked on the back of firming natural gas prices. The stock lagged the service industry in general while North American natural gas drilling underwent a long inventory correction. The stock has much more room to run and trades at a low valuation relative to peak cycle earnings potential.
With other energy purchases, we're going to pick up shares of Petrobank. The stock offers exposure to Canadian oil sands, complimenting our large position in Encana. The company will also benefit as the recent excitement over the Bakken Oil Shale deposit spreads to Canada. Finally, we will increase our services industry exposure with diversified services provider Weatherford International and additional shares of Transocean, the single best value in the industry. Brazil recently announced they have locked-up 80% of the world's deep water drilling capacity in long-term contracts. The industry will be astounded by how long this cycle will run. Forward earnings estimates for Transocean have a long way higher to move - particularly for years 2010 and beyond.
Technology Catching A Bid; Global Economy Not Tanking
We're adding shares of Intel and Nokia to the portfolio. In our view, Nokia just hit a bottom and we're fearlessly going after the falling knife. Key supplier Texas Instruments reported favorable inventory trends and Nokia's shares have fallen to the point where they represent sound value in telecom. Many areas in the semiconductor space have turned around nicely, and are showing signs that the inventory overhang will be worked down. Our entry with ANADIGICS and Broadcom were superbly timed and while Intel will be a far more boring position, there's a time and a place for "boring."
Finally, we're adding shares of Brazilian base metals mining giant Valle - something we should have done months ago, but nevertheless the shares are still attractive
At the open, we will establish the following positions:
- Petrobank Energy and Resources (PBG: Toronto): Buy 200 shares at the open
- Chesapeake Energy (CHK: NYSE): Buy 200 shares at the open
- XTO Energy (XTO: NYSE): Buy 200 shares at the open
- Transocean Inc. (RIG: NYSE): Buy 100 shares at the open
- Nabors Industries (NBR: AMEX): Buy 300 shares at the open
- Weatherford International (WFT: NYSE): Buy 200 shares at the open
- Companhia Vale ADS (RIO: NYSE): Buy 300 shares at the open
- Intel Corp. (INTC: NASDAQ): Buy 200 shares at the open
- Nokia Corp. (NOK: NYSE): Buy 300 shares at the open
Please note: While the order to buy on the open for Petrobank is submitted before the market open Monday, it will execute on Tuesday, at the market open. Canadian stock markets are closed on Monday for the Victoria Day holiday.
Be sure to enter your email address on the upper right corner of the Investor Intelligentsia website for free alerts when we publish. We don't spam. We don't sell addresses. Our service is free and we respect your privacy, your trust, and your interest in our educational enterprise
Please Read Our Feedback, Profile, Disclosure, Compliance and Disclaimer:
Sunday, April 20, 2008
Tuesday, April 8, 2008
Portfolio Update: Adding more Agrium, Inc.; Introducing New Portfolio Layout
This is only a brief post to update the portfolio and introduce our new layout. Click here to pull yesterday's closing quotations for the Investor Intelligentsia Model Portfolio. Holdings are now categorized by sector, and weightings are more readily visible. The comments section will be developed soon.
The model portfolio has returned about 3% since inception, Nov. 15th, 2007. While that's no great shakes, it certainly stands above the S&P 500 and we've focused all the while on some of the most volatile sectors in the market. The relative performance is actually not too shabby. The portfolio's birth and management life corresponds to the rump of the credit crisis we're muddling through.
On an intraday basis we are going to enter a limit order for another 300 shares of Agrium, Inc. (AGU: NYSE) In our judgement, the company offers the best risk/reward in the fertilizer space at this time. They are a blue-chip Canadian firm, but their recently expanded retail distribution network has some analysts and institutional investors factoring a lower multiple on earnings for the shares. We don't agree with this view. The stock should close the valuation gap with it's peers over time.
Please see our previous notes on Agrium and the fertilizer sector.
As of 11 a.m. Eastern Standard Time, a limit order set for 300 shares at $71.00 will activate, and will remain in place until canceled. This should easily execute today.
3:40PM PST Update: The April 8th closing portfolio values are now available. Click here to pull up the portfolio.
The model portfolio has returned about 3% since inception, Nov. 15th, 2007. While that's no great shakes, it certainly stands above the S&P 500 and we've focused all the while on some of the most volatile sectors in the market. The relative performance is actually not too shabby. The portfolio's birth and management life corresponds to the rump of the credit crisis we're muddling through.
On an intraday basis we are going to enter a limit order for another 300 shares of Agrium, Inc. (AGU: NYSE) In our judgement, the company offers the best risk/reward in the fertilizer space at this time. They are a blue-chip Canadian firm, but their recently expanded retail distribution network has some analysts and institutional investors factoring a lower multiple on earnings for the shares. We don't agree with this view. The stock should close the valuation gap with it's peers over time.
Please see our previous notes on Agrium and the fertilizer sector.
As of 11 a.m. Eastern Standard Time, a limit order set for 300 shares at $71.00 will activate, and will remain in place until canceled. This should easily execute today.
3:40PM PST Update: The April 8th closing portfolio values are now available. Click here to pull up the portfolio.
Monday, April 7, 2008
The Bulls Are Back In Town; We're adding ANADIGICS, Broadcom, Migao Corporation and Alliance Grain Traders Income Fund
Spend more than ten minutes watching CNBC or Bloomberg these days and it’s hard to not hear arguments about why the stock market has hit bottom. Trillions in cash has remained on the sidelines all throughout this credit crisis and bulls are getting itchy trigger fingers. We believe the stock market will move higher in the coming months, in large part on the back of improving psychology and the impact of liquidity brought forth by central banks and periodic bail-outs sourced from sovereign wealth funds.
For better or worse, the institutional money community has concluded that the Bear Stearns skewering marked a likely bottom in the stock market. They see financial services shares already having discounted sufficient carnage to cover remaining write-offs and vastly lower operating earnings going forward. While we sympathize with the former point, we still believe the share performance of financial services companies will continue to struggle for well over another six months given significant underestimation of lower operating earnings in 2008 and 2009. The stocks will continue to move higher for at least another month, but we believe the financials will not have a sustained “V” shaped recovery even while the rest of the stock market moves higher, well after the bounce in financials.
Inflation will be a big story in the second half of this year, and how the Fed deals with that problem will directly impact the direction of financial service company stock performance in the latter part of 2008. We suspect the Fed will attempt to blast rates higher near the tail end of this year, taking back cuts in a quicker than anticipated fashion. Call it one big game of monetary policy chicken. It’s unclear if the Fed will even have the wiggle room to perform such acrobatics, what with another huge wave of adjustable rate mortgage resets careening through the realestate market over the autumn and winter months. But we have seen Fed governors float “trial balloons” about the idea of raising rates quickly at the end of the year or in early 2009. Please note, this is not our forecast and we ultimately believe the Fed will remain hamstrung. But it’s important to underscore that a few months from now we will not be surprised to here arguments along these lines as but the latest and greatest excuse to declare the death of the commodities bull market. Don’t fall for it.
Shopping Time: Quality semiconductor exposure and more fertilizer
On the open, we will establish the following positions:
- Alliance Grain Traders Income Fund (AGT-UN): Buy 1,500 shares, C$10 limit price, good until canceled
- Migao Corporation (MGO-To): Buy 2,000 shares on opening price
- ANADIGICS (ANAD: NASDAQ): Buy 1,500 shares on the opening price
- Broadcom (BRCM: NASDAQ): Buy 500 shares on the opening price
We profiled Alliance Grain Traders Income fund in a stand-alone post. Click here to pull it up.
Miago Corporation is one of China’s largest suppliers of specialty potash based fertilizers. The stock cratered when the credit crunch took down many commodities companies last January. It has yet to recover, although we believe that is going to change starting this week. The stock is profoundly undervalued relative to its peers and could very well double from current prices within the next 18 months. We will profile the company in more detail in the future.
Last fall, technology was seen as a safe haven, a place one could hide from credit crisis turmoil. This false perception went through one major corrective cycle (remember the period when Apple and other high momentum stocks crashed?) and an echo before all was said and done. But today, we believe it’s appropriate to add exposure. We truly are at a stage where forward discounting of stronger business is justified.
Significant carnage has dented the shares of wireless semiconductor stocks. We feel confident in selecting ANADIGICS as a primary player in this market, and we also like Broadcom's growing wireless market design wins. Both stocks should bounce strongly in the weeks and months ahead. ANADIGICS is supremely positioned as a power amplifier supplier for the entire wireless market and they have strong design wins with the cable set top box market. Broadcom’s push into wireless has been fantastic thus far. The company is a leader in broadband semiconductor development but their wireless design wins – particularly with Nokia – greatly strengthen the company. We will cover both companies in more detail going forward, along with the rest of the technology industry.
Subscribe to:
Posts (Atom)
