Opportunities with Civil Unrest in the Middle East

Civil and political tensions are never good for the overall market and it appears that the unrest will continue indefinitely as other neighboring countries’ citizens decide to take advantage of the mood of the times. However, small individual events can trigger strong temporary upwards movements in the markets. It appears that sooner rather than later, the Egyptian president will be required to leave office. That event will trigger a big immediate and very temporary surge forward. In the meantime, there are certain sectors which one can profit with on short term moves. These are energy and to a lesser degree, precious metals.  

Short Term Energy Recommendations: Canadian Natural Resources (CNQ), & Talisman (TLM). In the secondary category, keep a watch on Encana (ECA), Nexen (NXY) & Suncor (SU) which also hit a new 52 week high on Friday. Other interesting stocks in the sector include:  Baytex (BTE), Cenovus (CVE) & Vermillion (VET). Baytex (BTE) also hit a new 52 week high on Friday while the other two stocks came very close.

Short Term Precious Metal Recommendations: Agnico Eagle (AEM), Barrick (ABX) & Goldcorp (G). Of secondary interest, Eldorado (ELD) & Iamgold (IMG).

Some stock trades I made this week follow upon my recommendations of last Sunday. Namely having seen agriculture giants pop out of the gate on Monday, I waited for a pullback on Tuesday to purchase Potash (POT) @ $163.10 and sell it on Thursday @ $174.99 (7.28% gain). It closed the week at $173.99. Similarly, I purchased on Tuesday Agrium (AGU) @ $85.47 and sold it on Thursday @ $89.99 (5.29% gain). I repurchased it on Friday @ $87.85 and it closed the week @ $88.02.  Two weeks ago I purchased Canadian Natural Resources (CNQ) @ $42.14. Friday’s closing price was $43.08.

Other Stocks to Watch include: Note that after hitting new 52 week highs on Friday, both Canadian National Rail (CNR) & Canadian Pacific (CP) came off quite dramatically particularly noting that they’re not traditionally volatile stocks. Viterra (VT) has been hot. Teck Resources (TCK.B) not so much but it can move quite rapidly on temporary good news. Both BCE & Telus (T) have been strong, each hitting new 52 week highs. Buy them on dips for income. Looks like another volatile week ahead. Good luck.

 

Opportunities Ahead

As noted in last week’s blog, as January goes, so usually goes the rest of the year. US markets are up for the year to date, reflecting renewed optimism in a rebound for the economy. Following this past week’s negative returns, particularly evidenced in the last 10 minutes of Friday’s trading, the TSX Composite is now in negative territory. However, I strongly presume that Canadian Large Cap Stocks will follow the US direction.

As recommended in last week’s blog, I personally bought on weakness Potash (POT) on Friday @ $160.85 and sold a little later and a few minutes before closing at $163.70. Moments later the stock closes at $159.77 ! That would indicate the strength of the late selloff. Many other market leaders closed at their daily or weekly lows usually indicating a weak opening Monday AM. This however could offer opportunities to pick up great stocks at lower prices.

This past week moves of interest include: After hitting a new 52 week high, Agrium (AGU) closed down for the week 6.13% and 8.55% below the new high. Potash (POT) also broke a new high yet closed the week down 6.89%. In a related sector, Viterra (VT) hit a new high and closed up 10.09%. Soft commodities are still therefore hot and this should lead one to believe that opportunities exist also in the late falling fertilizer sector. Certain energy stocks are also showing strong forward momentum including: Encana (ECA), Nexen (NXY) & Talisman (TLM) all three making strong gains for the week. Lastly note the weakening of some great financial stocks including: Bank of Montreal (BMO), Scotia (BNS), CIBC (CM), National Bank (NA) & Toronto Dominion (TD). CIBC (CM) lost 3.82% for the week. Research in Motion (RIM) closed at a weekly low losing 5.434% overall.

Growth Recommendations Going Forward: BUY ON WEAKNESS (!). Keep a close eye for an entry point on Agrium (AGU), Potash (POT) Teck Resources (TCK.B), Canadian Natural Resources (CNQ), Talisman (TLM), & Research in Motion (RIM).

Income Recommendations:  BCE, Telus (T), Bank of Montreal (BMO), CIBC (CM), Royal (RY) & TD.

Income with Immediate Growth Potential: Baytex (BTE), Bonavista (BNP), Crescent Point (CPG), Pengrowth (PGF). A good week to make money.

 

The January Effect

While last blog earlier this week focused on the stock performance over the past 52 weeks (19.55% gain), today I’ll review picks made on the last column in December 4 weeks ago. 4 of the 5 income/value picks increased in price for an average gain of 3.38%. Top gainers were TD (+5.50%) and Royal (RY) +5.22%. Only loser was BCE -0.92%. 6 of the 8 growth stocks increased in price for an average gain of 5.06%. Also six of the selections hit new 52 week highs during the period including Agrium (AGU), Canadian Natural Resources (CNQ), Labrador Iron Ore Units (LIF.UN), Potash (POT), Silver Wheaton (SLW) & Teck Resources (TCK.B). Top gainers were Potash (POT) +21.89% and Agrium (AGU) +11.24%. Top loser was Agnico Eagle (AEM) –10.33%.

In the portfolios I manage I purchased on several occasions: (1)  Bank of Montreal for an average purchase price of $57.56 (currently $59.53); Canadian Natural Resources (CNQ) for an average price of $41.69 (currently $41.53); (3) Research In Motion (RIM) for $61.67 (currently $64.18). Other stocks I purchased in late December well below their current closing price included: Agrium (AGU), BCE, Rogers (RCI.B), Royal (RY) & TD.

Stock Markets almost always perform well during the 3^rd year of a US presidential term and January is most often an indicator of the future year’s performance. As such it looks like it could be a strong year for the markets irrespective of the high US unemployment and weak housing market.

Longer term stock recommendations include value/income stocks: BCE, Rogers (RCI.B), Telus (T), Bank of Montreal (BMO), National (NA), Royal (RY), TD and ex-income trusts Arc Resources (ARX), Crescent Point Energy (CPG), Pengrowth (PGF) & Vermillion (VET). Growth recommendations going forward longer term (try to buy on dips) include: Agrium (AGU), Potash (POT), Canadian Natural Resources (CNQ), Labrador Iron Ore (LIF.UN), Potash (POT), Research In Motion (RIM), Suncor (SU), Talisman (TLM), & Teck Resources (TCK.B). It doesn’t look like precious metal stocks will be headed higher if the US economy improves however for more speculative recommendations, watch Agnico Eagle (AEM), Kinross (K) & Silver Wheaton (SLW). Good Luck.

Canadian Large Cap Stocks: Welcome to 2011

A brief mid-week blog to begin 2011. Looking back on top picks made exactly 1 year ago (Sunday January 10), 15 of 22 stocks selected increased for an unweighted average price gain of 15.19%. Combined with dividends, 17 of 22 stocks increased with the overall portfolio gaining 19.55%. Average dividend payout for the 22 stocks was 4.36%. Top performers not including dividends were: Teck Resources (TCK.B) +53.72%, Labrador Iron Ore Units (LIF.UN) +52.98%, Vermillion Energy (VET.UN) +34.94%, Penn West (PWT) +34.37%, Agrium (AGU) +30.89%, Potash (POT) +30.34%, BCE +27.81%, & Pengrowth (PGF) +25.71%. Top losers not including dividends were: Encana (ECA) -17.64%, Manulife (MFC) -15.82%, and Husky (HSE) -11.67%.

Going forward it appears that the US economy is improving and confidence in the markets is building. With China and Asia looking strong, demand for resources should remain relatively high. Keep an eye on energy, mining and agriculture. I recently purchased Canadian Natural Resources (CNQ) on weakness owing to a fire in one of their main coking plants. Strong growth recommendations on weakness include: Agrium (AGU), Labrador Iron Ore (LIF.UN), Potash (POT), Teck Resources (TCK.B), & Talisman (TLM). Income recommendations include BCE, Telus (T), Crescent Point Energy (CPG), and some banks including: Bank of Montreal (BMO), National Bank (NA), Royal Bank (RY) & Toronto Dominion (TD).

Speculative recommendation includes: Grande Cache Coal (GCE), Research In Motion (RIM) & TSX Group (X). Will follow up shortly and happy new year.