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In
This Edition... |
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Advance
Notice of New Company Report
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Micro Caps, What
Have You Done For Me Lately?
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Checkin' Up on
Those Oddball Industries
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Advance
Notice of New Company Report |
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Though we can't
provide any specifics just yet, we do want to go ahead and give you an
early notice of a new company profile. Barring any unexpected rescheduling,
after
the market closes next Friday (September 12th), check your e-mail inbox.
You'll find a detailed look at a highly compelling company.
To whet your
appetite in the meantime, here's some food for thought...
-
 It
requires four times as much energy to generate one unit of GNP (gross
national product) in China than it does in the U.S.
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The electricity
distribution system in China is struggling to meet the demand. Temporary
electric power shortages are becoming common, which is a particular problem
for a country still growing its industrial machine.
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China meets 2/3
of its energy needs by burning coal, which is one of the dirtiest fossil
fuels. Acid rain caused by SO2 pollution has affected 1/3 of China's
farmland. Some soil can't be farmed any longer.
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China's government
has vowed to shut down inefficient factories in high-pollution industries,
which are primarily electricity, coal, and steel.
Clearly
there are some big problems that need to be taken care of, and when we
say 'need to', we don't mean 'it would be nice if'. One way
or another, those problems will be solved.
Of course, a
company that could effectively eliminate or solve those challenges might
just be a solid investment opportunity, right? Just something to think
about. Check back Friday - we think you'll be interested.
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Micro
Caps, What Have You Done For Me Lately? |
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The Micro Cap
Press has devoted quite a bit of attention lately to the disparate performance
of various market caps and styles (value or growth). Why? Because
there's a big difference ...a disparity an astute investor could
take advantage of.
Just for perspective,
since our initial style/cap
forecast from July 3rd, small cap value stocks have gained 13.3%,
while large cap growth stocks have lost 3.0%. For a two month time
frame, that's a big enough difference to try and tap into.
 One
of the groups we didn't add at the time was true micro cap stocks
...equities that really aren't part of any major index (even the
small cap indices). Since they're part of our focus though, we'll put them
into the mix today.
We'll use the
three micro cap exchange-traded funds as our proxy... the PowerShares
Zacks Microcap Portfolio (AMEX: PZI), the iShares Russell Microcap
Fund (NYSE: IWC), and the First Trust Dow Jones Select Microcap
Fund (AMEX: FDM).
On the nearby
percentage change chart, these three ETFs are the ones plotted with bold
lines. Clearly you can see they've done pretty well lately...much better
than most of the other groups. Though everything took a hit on Thursday,
we are indeed starting to see micro caps outpace the rest of the
market.
That's encouraging
in the grand scheme of things, as micro caps have been lackluster going
back a couple of years. (Click
here for a two-year chart.) If the group continues to gain momentum,
we suspect we'll have new ideas for you at a much faster pace.
In any case,
because there's such a big opportunity in being in the right group (or
out of the wrong one), we're going to keep all three of these ETFs
in the ranking contest.
By the way,
isn't it amazing how over the last 24 months, the top group is up 13.2%,
while
the bottom group is down 19.0%? This strategy is well worth applying.
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Checkin'
Up on Those Oddball Industries |
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Over the course
of the last several weeks we've been putting a lot of focus on finding
strong
industries rather than finding attractive stocks.Why? That's
just the nature of a bear market - good stocks can still move lower
in a bear market, but a rising industry index is a rising industry index
regardless of the environment (and therefore presents a long/bullish
opportunity).
 We
specifically provided a list
of attractive small cap industries in the blog on Monday, theorizing
those groups with short-term as well as long-term rallies in place
were likely to continue moving in that direction. It's akin to the scientific
principle of inertia... a body in motion tends to remain in motion.
That's not to
say every industry rising at the time has continued to rally, particularly
after Thursday's marketwide pain. However, we do think it's worth
pointing that the industries we specifically highlighted at the end of
last week - apparel, retail, and packaging - are this week's
leaders so far.
Coincidence?
Doubtful.
The methodology
isn't a complete stock-picking strategy in itself. Fundamentals still matter,
as does the overarching market environment. However, every edge you have
can help you beat the market. And in our observation, being in the right
sector or industry can be a big edge.
We just wanted
to illustrate the point of the principle, as we intend to apply it more
often going forward. |
Updated: 9:18 am PST (17:18 GMT), January 5, 2009
