| | | | | Thursday, September 3, 2015 | |
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Eric Fry, extolling the virtues of agnosticism, reports...
Alex Green, the Chief Investment Strategist of The Oxford Club, is a great investor. One of the reasons he's so good is that he's an agnostic. He admits he has no idea where the stock market is heading... and he also admits that he wastes no time worrying about it.
You might say he places his faith in agnosticism.
Since he knows he cannot know the unknowable, he devotes his considerable investment acumen to analyzing what is knowable. He does his homework. He identifies great companies... and then waits for an opportunity to buy their shares at a good price.
One of the tactics Alex uses to identify great companies is to watch for moments when CEOs and other company insiders are buying their own stock. This "insider buying" can often provide telling and timely clues about a company's profit trajectory.
"Insiders might sell their stock for any one of a number of reasons," Alex explains. "But they only buy it for one reason: because they think it will move higher."
Knowing this, Alex monitors insider-buying activity very closely. When insiders plunk down their own capital to buy stock in their own companies, that's usually a good sign.
This very basic truth inspired Alex to launch his Insider Alert trading service more than a decade ago. And its success has been impressive... very impressive.
Over the past 10 years in his Insider Alert service, Alex has recommended, and then subsequently closed out, 474 trades based on insider buying. Those 474 trades produced an average return of 33.8%.
That's not a bad decade of work!
And now, for the first time ever, Alex is allowing his newest subscribers to "test drive" his service for a full six months - completely risk-free. So I'd urge you to check it out here:
How to Profit From Insider Buying
After checking out Alex's six-month Insider Alert offer, please check out his latest insights about the natural resource sector... along with his clever idea about how to invest in it.
The Best Way to Buy Commodity Stocks Right Now
A few weeks ago, Barron's ran a cover story with this emphatic headline: "Commodities: Time to Buy."
Unfortunately, they forgot to put a question mark at the end.
Yes, oil has tumbled 30% since late June and is off nearly 60% over the past 13 months. Gold is closing in on $1,000 an ounce, nearly half its 2011 high. Silver, copper, iron ore and natural gas are all in the dumper as well.
Is it time to put on your contrarian hat and buy? Maybe. Let's take a closer look at what is going on in this sector-specific bear market. The decline in natural resource prices is variously blamed on the slowdown in China, weak demand in Europe and/or oversupply in the United States thanks to the Shale Revolution. Indeed, these are all factors. But there's something more fundamental going on here, too.
The bullish case for investing in commodities is often too simplistic. It generally goes something like this: Natural resources are limited. Human needs and wants are limitless. And the world population is growing by tens of millions of people a year.
Ergo, invest in raw materials.
However, innovation and technology often undermine prices for commodities. We've seen this phenomenon occur in agriculture, for example, where irrigation, mechanization, genetic modification and new pesticides and fertilizers have all boosted productivity.
We've seen this in the oil and gas industries as well, where new technologies like fracking and horizontal drilling have made previously inaccessible reserves available - boosting supply and weakening prices.
Today many utilities, factories and truck manufacturers are switching from inexpensive oil or coal to even cheaper natural gas.
You won't find many folks getting gold teeth or silver fillings anymore either. People prefer far cheaper - and whiter - alternatives. Yes, raw materials' prices generally surge during war - or financial or political turmoil - when manufacturers worry about obtaining the supplies they need and investors seek the safety of tangible assets. But you just can't bank on calamity every year.
On the plus side, natural resource stocks are excellent portfolio diversifiers. Historically, commodities have rallied when stocks and bonds are falling. (Although that has decidedly not been the case lately.)
And commodity stocks are inherently volatile. That means they can put on sudden short-term rallies that traders find highly profitable. The rub, of course, is the timing.
Everyone who has bought commodity stocks because they were "cheap" over the past year has only regretted not waiting a while longer.
Since prices could conceivably go lower still, what is the best way to buy natural resource stocks today? My answer is BlackRock Resources & Commodities (NYSE: BCX), a closed-end fund.
Recall that closed-end funds are not like Fidelity or Vanguard mutual funds. Like ETFs, they trade on an exchange and can be bought and sold throughout the day, not simply redeemed at the closing price like open-end mutual funds.
But unlike ETFs, closed-end funds see their prices fluctuate well above or below their net asset values (NAV). When a fund trades above its NAV, it is said to be selling at a premium. When it trades below the NAV, it is selling at a discount.
There is no easier (or more obvious) buy or sell signal than to buy these funds when they trade at big discounts and sell them when they go to a premium. Right now BlackRock Resources & Commodities is a bargain at its current 13% discount to NAV.
Buy a few shares and you're picking up an interest in Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), Rio Tinto (NYSE: RIO), BP (NYSE: BP), BHP Billiton (NYSE: BHP), Syngenta (NYSE: SYT), Monsanto (NYSE: MON), CF Industries (NYSE: CF) and Archer-Daniels-Midland (NYSE: ADM) - all among the fund's 10 largest holdings - at a 13% discount to their already depressed prices!
You don't have to hold off - and miss a potential rally - by waiting for these stocks to sell off further. You can buy them 13% cheaper now.
Yes, commodity stocks - and BlackRock Resources & Commodities - could go lower before they go higher. But when they do turn around, this fund is likely to experience a slingshot effect, as resource stocks rally and the fund's discount evaporates... and perhaps even goes to a premium.
In my view, BlackRock Resources & Commodities is the best, cheapest and safest way to take advantage of the current bear market in commodities.
Good investing,
Alex Green
For The Non-Dollar Report
*This article originally appeared in Investment U.
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