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Investmentu Three Contrarian Investment Opportunities

Investmentu Three Contrarian Investment Opportunities

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Explains how investors can take advantage of these three contrarian investment opportunities
Explains how investors can take advantage of these three contrarian investment opportunities

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Published by: http://besthedgefund.blogspot.com on Feb 13, 2010
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08/20/2010

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INVESTMENT U RESEARCH REPORT
Contrarian Investing: Why It’s Last Call for These Three ContrarianInvestment Opportunities
by Louis Basenese, Small Cap and Special Situations Expert
When salmon swim against the current, they know they’re taking a big risk. They know they’re easyprey for bears. Many get killed.When investors swim against the current – defying conventional wisdom about a particular stock orsector of the market – they can make a killing.That, in a nutshell, is the allure of contrarian investing.The trick, of course, is not to blindly pick any investment that goes against the crowd, but instead tolatch onto the contrarian opportunities that everyone hates, but which the fundamentals support. And doso before the rest of Wall Street wises up, too.So with 2010 still in its infancy, I’ve got three contrarian opportunities for you to consider this year. I’vetracked each of them closely over the past six months, and now is the time to take action…Why? Simply put, there’s a definitive shift in sentiment afoot – something that often precedes a bigchange in price. In other words, this could be your “last call” to ante up on these contrarian trades. Sohere’s a rundown on each…
Contrarian Investment #1: Everybody Doesn’tHate the Dollar Anymore
Six months ago, I was a pretty lonely man.That’s because I was one of the only people suggesting that the U.S. dollar would rebound.Rather than spell out all the reasons why, check out this pro-dollar article from my colleague,Alexander Green. He’s decided to buckconventional wisdom with me andsums up the argument very neatlyhere.And it’s notable that otherrespected investment gurus havefollowed suit. Wall Street legends likeByron Wien and Jim Rogers, of allpeople.When it comes to Rogers, herevealed he’s recently been buyingdollars in recent months inanticipation of a near-term rebound.And a quick glance at the chart belowfrom Bespoke Investment Group
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Investment U
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US Dollar Index: 2007–Present
Jan ’07 May Sep Jan ‘08 May Sep Jan ’09 May Sep Dec9088868482807876747270
 
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indicates that the dollar could be poised for a sustained rally, based on the technicals.In making my pro-dollar argument, I indicated that the prospects for the dollar were strongest againstthe euro, since currencies trade in relation to each other.And we can thank Greece’s near-default for opening up everyone else’s eyes to this fact, too.But there are other fundamentals working against the euro. Namely, the winding down of governmentstimulus measures in the eurozone.Once they end, demand will certainly suffer. And it will also draw attention to a key weakness of manyEuropean companies: They didn’t cut costs as aggressively as their American counterparts during therecession, so their bounce back to profitability will be subdued.In addition, a strong earnings season for U.S. companies in relation to their European counterpartsshould accelerate the dollar’s rise and the euro’s fall.
Contrarian Investment #2: Bye-Bye Shanghai?
Boy, I really got the masses steamed with an article on the China sell-off four months ago.All I did was suggest the country’s run-away stock market could use a cooling-off period – and gave 10reasons why that would happen.Some folks couldn’t bash their keyboards fast enough, with a few even calling for my resignation.Apparently, it was blasphemous to speak a bad word about China in the investment world.Fast-forward to today and the list of parties taking a cautious stance on China is growing. For example…
Pimco’s Bill Gross.
Legendary short-seller Jim Chanos.
The European Union Chamber of Commerce in China.
Fang Gang, who heads the National Institute of Economic Research and advises China’scentral bank.
The China Banking Regulatory Commission.
Stratfor, the global intelligence company referred to as the “Shadow CIA.”I’ve even seen marketing pieces in the newsletter industry tapping into this change in sentiment.Not only that, the fundamental evidence continues to mount in favor of a China correction.For instance, data from the People’s Bank of China shows a 126.5% rise in overdue credit-cardaccounts. That’s bad news for any economy. But it’s terrible news for China bulls, who are counting onChinese consumers to keep spending.Again, the advice here is simple – and two-fold:
At the very least, tighten up your trailing-stops on any Chinese stocks you own to ensure thatyou walk away a winner.
If you can stomach being a contrarian, consider selling short or buying puts on Chinese stocksand ETFs.
Contrarian Investment #3: Stepping on the (Natural) Gas
“Is Natural Gas Down for the Count?”

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