Thursday, March 8, 2007

New Directions

During this past week of volatility, I have shifted my focus somewhat. The volatility has shown us all that we are affected by foreign markets more than we probably thought. In terms of investing, not much has changed. It all depends on your focus. If you are thinking near term, then you've got to continue to look at energy and consumer goods. You need to stay away from technology and financial names. Finance has taken a hit on the sub-prime mortgage "crisis." Anyone with exposure to that area of lending is taking a pretty good hit right now.

I continue to like energy for the near term. In all the markets out there, energy really is the one constant that continues to see increased demand. In terms of oil, I'm most interested in refiners rather than diversified names or drillers. My top pick for a refiner is Frontier Oil (FTO). They are a smaller company (3 bil), that is positioned nicely compared to some of its competitors. Higher profit margins, a 60% return on equity, and plenty of cash make it look good right now. Gasoline prices have been climbing, and should continue to climb as we hit the driving season.

To get in much heavier, I need to see some signs of stability. Tomorrow (Friday) should be a good sign as to where we are headed. If we see a sell off, I'd continue to stay cautious. If we see some gains heading into the weekend, it could be a sign that we are in good shape.

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