Friday, June 6, 2008

How to Cash in on a Trend

The market is continuing these strong one-day reversals. Yesterday the market looks great, today it looks bad. The key for me would be if we trade out of the current trading range (either up or down), and I'd look at that for an indicator for the coming months. For the Dow, it would be around 12300-13000. I'm not in favor of trying to predict the market as a whole though. We need to identify trends and that includes companies who are growing their earnings in this challenging market (think oil,infrastructure, steel and ag stocks), as well as good values on world class brand names (I like Nokia in this space right now, and there are others).

Although the climate bill is stalled for now, it is something that will be addressed under the new administration. Both McCain and Obama have pledged to do much more in finding alternative and renewable energies. I continue to like companies involved in the construction of nuclear and wind infrastructure. This is a case where rather than invest one of the main players in an industry, invest in a company that is supplying them all. For example, in the oil space. Rather than buy an integrated oil company like Exxon, who pays a lot for their oil and has issues with refining, why not buy an offshore driller? In the nuclear and wind sector, why buy a speculative, volatile and expensive wind turbine maker or solar panel maker, when you can buy a company that supplies components for wind turbines, or is one of the few who can construct a new power plant?

Thats my viewpoint in how to cash in on a growth trend.

Looks like the market will be limping into the weekend.

Have a good one!

1 comment:

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