Even by the standards of Wall Street’s most seasoned investors, the recent volatility in global markets has been remarkable. During the past month, both of the world’s largest financial institutions and the world’s biggest commodity stocks exhibited volatility more characteristic of Internet companies at the tail-end of the dotcom collapse.
Investors have been “throwing the baby with the bathwater” — dumping perfectly good commodity stocks with solid business prospects. As a result, you were stopped out of no fewer than three commodity-related positions this past week — including gold miner Barrick Gold (ABX), the Elements Rogers International Commodity ETN (RJI), and oil rig giant Transocean (RIG). Recall that earlier this month I had moved both ABX and RJI to HOLD.
Opinions vary on whether the remarkable (and ongoing) collapse of the price of oil and commodities marks the end of the “commodities supercycle.” Goldman Sachs has been quite emphatic in its recommendation to its clients to buy into the recent dip in the energy sector. This would be bullish for your remaining energy holding in Petrobras (PBR), which last week I moved to a HOLD.
So what should you do during such times of uncertainty? Listen to the market more than to Goldman Sachs. And stick with your carefully calculated stop prices — as unpleasant as that can be.
I will be providing you with no fewer than four recommendations in the September edition of Global Stock Investor, which should arrive in your mailboxes next week. These include two new currency plays, as well as re-entering two positions we have been stopped out of during the last six months. The currency plays are relatively steady “cash plus” style investments, while our stock picks are highly volatile, but have the potential to soar 50% or more on any sustained market rally.
And don’t be surprised to see me recommend that you get back into some of the very same commodity-based positions that we’ve been stopped out of during the past few weeks, as these positions steady and bounce off of their lows. We did the same successfully with a number of our holdings last September after the sharp sell off in August.
PORTFOLIO UPDATE
NII Holdings (NIHD) was hit this week when market rumors circulated that it may be a buyer of Sprint Nextel Corporation’s Nextel wireless network. This would be a highly uncharacteristic move for NII Holdings — and equally unlikely. The stock’s current, unjustified oversold position is actually a terrific entry point. NIHD is a BUY.
Petrobras (PBR) announced that its second-quarter profit rose 29% to 8.78 billion reals ($5.46 billion). Revenue rose 30% to 54.57 billion reals. The significant rise in oil prices on world markets, as well as rising oil and gas production and prices in the domestic market, all contributed to record profits. Petrobras’ overall crude-oil and natural-gas output rose 4% to an average of 2.39 million barrels of oil equivalent a day. With the oil price in a solid downtrend, I am keeping this stock at a HOLD.
