Buy the Dips
Falls Church, VA–The bull continues to charge ahead. I still expect some kind of correction at some point this month since it would be uncharacteristic for the markets to continue going up with no interruptions.
The main risk remains the shaky situation in the credit world. Consequently, the slowdown of the US economy could turn into a recession that would be very bad for the global economy. At this time, the probability for a recession by the end of the year or the first quarter of 2008 is around 50 percent.
It isn’t difficult to identify economic excesses in advance. Being able to specify the tipping-point is the problem. And it’s one that the perma-bears haven’t been able to solve either. They’ve been giving the wrong advice for two years now.
But if the world economy is able to help the US avoid a recession and help the US adjust to its problems gradually–as it has done for the past 12 months–then everyone will do just fine. Bottom line: The potential outweighs the dangers, slightly.
What to Do
Monitor your holdings, and don’t hesitate to skim some profits if you’ve scored some big gains, especially big short- and intermediate-term gains.
Stay diversified and view your portfolio as a long-term process that needs to be adjusted occasionally.
Don’t view stocks in the Silk portfolios and the companies that they represent as a path to quick profits—you’ll be disappointed.
Buy some insurance by hedging a portion of your long holdings.
Continue to buy the stocks recommended here, but be prepared to add more aggressively if a tactical correction takes place.
New Addition
There have been some companies that have lagged the rally that started after this summer’s correction. I’ve identified a couple that fit my investment themes as well as those with valuation appeal. Today, I add one to the Silk portfolio.
Bank of China-HK (OTC: BHKLY) has been underperforming the rest of the sector because of fears regarding its US sub-prime exposure (1 percent of assets).
The company is an HK subsidiary of the Bank of China (BoC), one of the big four state-owned commercial banks in China, with total assets of USD683 billion as of the end of last year.
It employs more than 230,000 people and operates 11,000 branches. BoC has two major foreign strategic investors: Royal Bank of Scotland (8.3 percent stake) and Singapore’s Sate investment company Temasek (4.1 stake).
The company reported solid interim results recently in HK, showing 14.7 percent revenue growth. More important, core profits have grown at a compounded annual growth rate of 17 percent in the past three years.
BoC-HK is one of the three biggest deposit gatherers in Hong Kong enjoying a stable funding situation; it offers a solid and sustainable dividend yield of 4.3 percent.
The risk of course is BoC-HK subprime asset-backed securities (ABS) exposure. The bank has made the necessary provisions and, given the institution’s well-funded situation, it should prove to be a much smaller problem that it’s currently believed.
Keeping the risks in mind, BoC-HK is well positioned to take advantage of the solid credit quality of HK and, given its solid foundation, expand its operations abroad, mainly in China. Boc-HK is added to the Long-Term Holdings Portfolio; 1 American Depositary Receipt (ADR) equals 20 ordinary shares.
Stock News
OAO Gazprom reported quite good overall results for the first quarter of 2007. Net revenues came in at USD23.3 billion and net income, was USD8 billion.
Strong revenues were helped substantially by solid sales to the former Soviet Union countries. Prices were up by 11 percent for European sales and 26 percent in the former Soviet Union (FSU).
Costs were also higher though, given that gas purchases for Central Asian countries were also more expensive. Also, a raise in capital expenditure suppressed cash flows (USD1.7 billion) this quarter compared to last year’s first quarter.
As Korea Electric Power (KEPCO) expands its operations abroad, it’s been reported that it will bid for a 26 percent stake in a Russian utility. The company and a group of other foreign companies will bid for a stake in TGK-4, which operates 26 gas-fired power plants in Moscow and St. Petersburg.
KEPCO may invest up to USD1 billion, and the auction is scheduled for 15 December. This fits with the company’s strategy for overseas expansion that has taken KEPCO in Nigeria, Russia, and South Africa, among other places.
Fresh Money Buys
Because the investment process is constant, if you’d like to add to your positions in portfolio recommendations or allocate new funds in a diversified way, focus on the following markets (consult the Portfolio for details), in order (for both countries and sectors):
The main risk remains the shaky situation in the credit world. Consequently, the slowdown of the US economy could turn into a recession that would be very bad for the global economy. At this time, the probability for a recession by the end of the year or the first quarter of 2008 is around 50 percent.
It isn’t difficult to identify economic excesses in advance. Being able to specify the tipping-point is the problem. And it’s one that the perma-bears haven’t been able to solve either. They’ve been giving the wrong advice for two years now.
But if the world economy is able to help the US avoid a recession and help the US adjust to its problems gradually–as it has done for the past 12 months–then everyone will do just fine. Bottom line: The potential outweighs the dangers, slightly.
What to Do
Monitor your holdings, and don’t hesitate to skim some profits if you’ve scored some big gains, especially big short- and intermediate-term gains.
Stay diversified and view your portfolio as a long-term process that needs to be adjusted occasionally.
Don’t view stocks in the Silk portfolios and the companies that they represent as a path to quick profits—you’ll be disappointed.
Buy some insurance by hedging a portion of your long holdings.
Continue to buy the stocks recommended here, but be prepared to add more aggressively if a tactical correction takes place.
New Addition
There have been some companies that have lagged the rally that started after this summer’s correction. I’ve identified a couple that fit my investment themes as well as those with valuation appeal. Today, I add one to the Silk portfolio.
Bank of China-HK (OTC: BHKLY) has been underperforming the rest of the sector because of fears regarding its US sub-prime exposure (1 percent of assets).
The company is an HK subsidiary of the Bank of China (BoC), one of the big four state-owned commercial banks in China, with total assets of USD683 billion as of the end of last year.
It employs more than 230,000 people and operates 11,000 branches. BoC has two major foreign strategic investors: Royal Bank of Scotland (8.3 percent stake) and Singapore’s Sate investment company Temasek (4.1 stake).
The company reported solid interim results recently in HK, showing 14.7 percent revenue growth. More important, core profits have grown at a compounded annual growth rate of 17 percent in the past three years.
BoC-HK is one of the three biggest deposit gatherers in Hong Kong enjoying a stable funding situation; it offers a solid and sustainable dividend yield of 4.3 percent.
The risk of course is BoC-HK subprime asset-backed securities (ABS) exposure. The bank has made the necessary provisions and, given the institution’s well-funded situation, it should prove to be a much smaller problem that it’s currently believed.
Keeping the risks in mind, BoC-HK is well positioned to take advantage of the solid credit quality of HK and, given its solid foundation, expand its operations abroad, mainly in China. Boc-HK is added to the Long-Term Holdings Portfolio; 1 American Depositary Receipt (ADR) equals 20 ordinary shares.
Stock News
OAO Gazprom reported quite good overall results for the first quarter of 2007. Net revenues came in at USD23.3 billion and net income, was USD8 billion.
Strong revenues were helped substantially by solid sales to the former Soviet Union countries. Prices were up by 11 percent for European sales and 26 percent in the former Soviet Union (FSU).
Costs were also higher though, given that gas purchases for Central Asian countries were also more expensive. Also, a raise in capital expenditure suppressed cash flows (USD1.7 billion) this quarter compared to last year’s first quarter.
As Korea Electric Power (KEPCO) expands its operations abroad, it’s been reported that it will bid for a 26 percent stake in a Russian utility. The company and a group of other foreign companies will bid for a stake in TGK-4, which operates 26 gas-fired power plants in Moscow and St. Petersburg.
KEPCO may invest up to USD1 billion, and the auction is scheduled for 15 December. This fits with the company’s strategy for overseas expansion that has taken KEPCO in Nigeria, Russia, and South Africa, among other places.
Fresh Money Buys
Because the investment process is constant, if you’d like to add to your positions in portfolio recommendations or allocate new funds in a diversified way, focus on the following markets (consult the Portfolio for details), in order (for both countries and sectors):
- South Korea (electric power, banking)
- Hong Kong (banking, real estate, publishing, infrastructure)
- Malaysia (ETF)
- India (pharmaceuticals)
- Russia (telecommunications, energy)
- Singapore (telecommunications, banking, industrial)
- China (consumer, coal, power, oil, water)
- Europe (pharmaceuticals, industrials, communications equipment, oil)
- Japan (banking, industrials)
- Taiwan (technology, telecommunications)
- Macau