Ask the Readers: What Are You Buying These Days?

by FI Fighter on November 17, 2015

in Ask the Readers

photo (7)

When it comes to investing these days, I’ve got to tell you, I’m not sure if I have ever seen anything quite like this before… Most investors who I speak to are completely petrified to be playing carefree in the ever-so-frothy markets right now. In fact, most of my closest friends, family, and colleagues are sitting mostly in cash right now… The ones who are daring enough to play, have all gone conservative, focused on buying up the beaten-down commodities and strong cash flowing real estate (which are somewhat sheltered from any extreme market meltdowns since they are already so cheap!).

At this point in time, my thoughts very much resonate with them. And in fact, they are inspiring me to do much the same…

Perhaps we are all just taking a page out of the book written by Stanley Druckenmiller and David Tepper?

From Bloomberg:

Some of the world’s top hedge fund managers scaled back their U.S. stock investments last quarter as markets tumbled.

The value of Stan Druckenmiller’s disclosed U.S.-listed equity holdings dropped 41 percent to $868 million, according to a filing from the billionaire’s family office. The listed holdings at Louis Bacon’s Moore Capital Management fell 39 percent to $1.65 billion, while at David Tepper’s Appaloosa Management, they dropped 30 percent to $2.82 billion.

The money managers retreated from U.S. stocks after the market has more than tripled from its 2009 low. Druckenmiller, who produced average annual returns of 30 percent from 1986 through 2010 at his Duquesne Capital Management, told an investor conference earlier this month that his outlook on equities could turn negative. Tepper, Appaloosa’s billionaire founder, said in September that he’s not as optimistic on the stock market as he could be because expectations for corporate earnings were high.

“I could see myself getting bearish, and I can’t see myself getting bullish,” Druckenmiller, a longtime hedge fund manager who worked for George Soros for more than a decade, said on Nov. 3 at the New York Times DealBook conference.

“I’m not as bullish as I could be because I have problems with earnings growth, problems with multiples,” Tepper told CNBC in the September interview, referring to price-to-earnings ratios. “I can’t really call myself a bull.”

Since I’ve been out of the markets (outside of the August scare), it looks like stocks are only continuing to soar UP, UP, and UP!

Maybe I’m dead wrong about this and there’s nothing to be worried about?

In any case, on a just about everyday basis, I’m hearing more and more investors interested in buying shares of: Freeport-McMoRan (FCX), First Quantum Minerals (FM.TO), BHP Billiton (BBL), Exxon Mobil (XOM), etc.

I can’t even begin to count how many times I’ve been recommended to buy FCX these past few months…

I would agree that the aforementioned stocks are all uber cheap right now… and they might possibly get even cheaper (hard to believe, right?). Long-term, I don’t think you’ll do wrong going with any of those selections…

Why haven’t I bought shares myself?

I have… sort of… My own preference has been to dabble more in the junior mining space… So, substitute out FCX and insert Ivanhoe Mines (IVPAF/IVN.TO)… The former is a proven producer, and the latter is an exploration/development company… The latter is obviously more risky, but in a super-depressed market, it can also offer more leverage to the upside on the rebound… Ivanhoe holds 3 world class projects (Kamoa, Platreef, Kipushi), and shares are so depressed right now, you can essentially “buy 1 and get 2 free”.

Again, more risk, but perhaps more reward as well…

These days, my emphasis has been on buying the most battered and bruised junior mining stocks, along with physical gold and silver. And just like my buddies, my current favorite investment is also cold-hard cash! 🙂

Right now, if I didn’t already have eight mortgages to account for, I would probably also look into buying more cash flowing real estate…

So, at this point, I would like to ask readers — Has the current market environment altered your investment thesis at all? What are you buying these days? Are you sticking to the “tried and true” approach, or are you also doing some garage sale shopping? Or both?

Here are some of my favorite investment ideas right now:

  • Cash, Cash, Cash
  • Endeavour Silver @ $1.41/share
  • Ivanhoe Mines (IVN.TO) @ C$0.62/share
  • Pilot Gold (PLG.TO) @ C$0.31/share
  • True Gold Mining (TGM.V) @ C$0.20/share
  • Alterra Power (AXY.TO) @ C$0.42/share
  • Energy Fuels (UUUU) @ $2.27/share

I haven’t spoken much about uranium on this blog (yet), but long-term, it’s one of my favorite investment ideas (along with copper)… The reason I haven’t gone overboard and bought up a bunch of shares of the leading uranium companies is that I strongly feel that a turnaround story isn’t in the cards at this time

Currently, there is more supply than demand, so there’s no real catalyst for share prices to take off immediately…

A turnaround story may realistically take anywhere between 5, 10, and maybe even 15 years to play out… So, there’s no real appeal for an investor/speculator to sink a ton of money into this play just yet… which is why I’ve elected to concentrate mostly on gold and silver, so far.

But markets tend to move when you least expect them to, so the uranium story is on my watchlist, no doubt… Currently, I have light exposure to Energy Fuels (UUUU) and Fission Uranium (FCU.TO) shares.

Here are some interesting facts for you:

From Uranium Energy Corp:

Screen Shot 2015-11-17 at 7.59.50 AM

From World-Nuclear:

Today there are some 437 nuclear power reactors operating in 31 countries plus Taiwan, with a combined capacity of over 380 GWe. In 2014 these provided 2411 billion kWh, over 11% of the world’s electricity.

Over 60 power reactors are currently being constructed in 13 countries plus Taiwan (see Table below), notably China, South Korea, UAE and Russia.

For 2015 and 2016:

Screen Shot 2015-11-17 at 8.07.57 AM

From Uranium Energy Corp:

Screen Shot 2015-11-17 at 8.00.08 AM

Yet most of the world’s fuel is produced in Kazakhstan alone… The U.S. only constitutes 2.7% of global production!

From Energy Fuels:

Screen Shot 2015-11-17 at 7.58.17 AM

That’s a lot of future growth outlined, with a good bulk of it coming from China (who else?)!

Energy Fuels (UUUU) is probably my favorite producer play at the moment because the company has a ton of resources in the ground (96.9 MM Lbs. in Measured & Indicated), and the current market cap is dwindling down to only ~$100 million. Shares have fallen hard since the summer, down almost 50% to about $2.27/share, from a recent high of $4.26/share on August 12.

The recent smackdown is what makes this story most compelling…

I like UUUU because the company is currently hedged into a few (6) long-term contracts with multiple utility companies, so they are able to generate consistent revenue… Hopefully enough to avoid dilution in the short-term. With a good balance of both exploration and development projects, along with the capability to scale both conventional and in-situ recovery (ISR) production (recent merger with Uranerz Energy), I like this “non-expiring call option” on the future rise in uranium prices (which is bound to happen at some point!).

At the right time, when prices finally spike back upward, the company should be well positioned to crank up production and generate much better profit margins!

From Energy Fuels:

Screen Shot 2015-11-17 at 7.56.56 AM

Uranium Energy Corp (UEC) is a more popular pick (much better promotion), and they are purely a low-cost ISR producer… But at comparable market caps/enterprise values, I’ve got to favor the company with more resources in the ground, and in this case, that’s UUUU.

As for copper, we’ll get into those details next time! But like I said, with both uranium and copper, I don’t feel the need to rush heavily into those speculations right this very moment (I’ve got a few positions established, though)… Commodities across the board have been getting crushed… Let’s see how long this trend can continue on for…

 

So, those are some of my favorite ideas…

 

What are YOU buying right now!?!

{ 16 comments… read them below or add one }

1 Anthony November 17, 2015 at 9:44 am

Hi,

Just starting my career and maxing out IRAS, and 401ks. What do you use for your taxable accounts? What do you use to watch and keep updated with the stocks your interested in?

Anthony

Reply

2 FI Fighter November 17, 2015 at 11:19 am

Anthony,

The usual sources: mainstream, alt media, Seeking Alpha, Stockhouse, various forums, friends, other bloggers, readers, etc…

I spend a lot of time digesting corporate presentations as well…

All the best!

Reply

3 joe November 17, 2015 at 10:48 am

sticking with tried and true. long term buy and hold. low cost index funds covering entire market. don’t look for the needle – buy the haystack.

Reply

4 FI Fighter November 17, 2015 at 11:23 am

Joe,

Index funds are great, if they work for you, keep at it.

There are numerous ways to invest… And sometimes you don’t need to look for the needle… it can be poking at you without you even knowing it!

Take care!

Reply

5 Hristo November 17, 2015 at 11:19 am

Hi Fighter,

I have sold big portion of my holdings and now I am sitting half in stocks and half in cash. I hold the rest of the stocks because I have set mind these are long-term investments, really like the companies and that I would like to hold through “gloom and doom”. However, I may change my mind if I see the outlook is getting really dark and economic situation – uncertain.

I would like to finish with a quote from Michael Burry written 15 years ago:
“Buy and hold becomes mantra at the end of a bull market. Buy and hold becomes anathema at the end of a bear market.”

Regards!

Reply

6 FI Fighter November 17, 2015 at 11:25 am

Hristo,

Thanks for sharing! Similar to yourself, there is a portion of my holdings that I’ve designated as hold through “gloom and doom”, which are my 8 rental properties.

I’m cashed up as well right now, holding out for whatever awaits…

Love the quote! It rings very true, especially today. Right now, I would say the consensus among most investors is that Buy and Hold is the best approach moving forward…

This was NOT the case in late 2008, early 2009!

But as they so often say, “history just keeps repeating itself”…

All the best!

Reply

7 Reepekg November 17, 2015 at 2:41 pm

70% of the income stream I direct to investments is automatically allocated to index funds with an investment horizon of forever.

Often, I put the other 30% into indexes as well. However, since P/Es do seem high, I’m taking the opportunity to put 15% in a REIT (since I own no property and am thinking of buying a primary residence in 3-5 years) and the other 15% to speculate in cheap oil. Been at it since summer.

Overall, these RE and oil plays are a small part of net worth… but I can’t help tinkering a bit.

Reply

8 FI Fighter November 17, 2015 at 4:07 pm

Reepekg,

I like you investment strategy across the board. I’m also a fan of buy and hold forever investments.

I’ve thought about tinkering with oil, but when I look at the charts, I’m always drawn back to gold and silver mining stocks… No arguments, there, oil is cheap too.

Always good to only speculate with a small portion of your net worth… I’m probably overdoing it a bit, but I’m sort of a gambler…

All the best!

Reply

9 Jon November 17, 2015 at 3:50 pm

I want to start piling into junior mining stocks but its clear that US equity markets are overvalued and facing a sell-off sooner or later…in which case the mining stocks will be punished also. I’m really not sure how to win. Part of me wants to just hold cash and wait for the likely significant correction before piling in. What do you think?

Maybe I pile $50k in now and save $50k for if we see a 30%+ correction. I imagine these junior miners would literally be the buy of a lifetime at this point.

Reply

10 FI Fighter November 17, 2015 at 4:09 pm

Jon,

That’s really tough to say… I tried getting into the miners a bit early and I’ve been pummeled as a result…

I think you’re right — if there is a sell-off, miners will go down with everything else… Whether it’s margin calls, or what have you, everything goes down in a massive sell-off event.

I really have no clue where things are headed, so I’m doing my best to hold cash… Although I certainly understand the temptation to buy more mining shares… Right now, I see plenty of bargains (too many to list even).

I thought the miners were a “buy of a lifetime” when they were trading 30% higher than where they are today! 😉

All the best!

Reply

11 Income Surfer November 17, 2015 at 4:05 pm

Well timed question buddy. First off, I believe the US bull market is overvalued and long in the tooth. I have been letting my cash build, and exiting a few positions (like Mondelez) which never executed like I thought they should. To a lesser degree, I’ve been buying. I bought a couple long term holdings, like Union Pacific……. Fastenal…… and Vanguard’s Emerging Market ETF in the selloff a few months ago. I will sell a few others (like GE and Proctor & Gamble) if their stock prices surge, but I’m ok owning these positions today. After all, I bought then in 2008. Happy hunting buddy!

-Bryan

Reply

12 FI Fighter November 17, 2015 at 4:16 pm

Bryan,

I agree with you completely there — the broader indices are overvalued for the most part and a correction is warranted at this point.

I like your strategy of letting the cash build up… Not terribly exciting, but there is a time and place for such prudence.

Definitely, I would welcome a selloff in some of those mentioned blue chips: UNP, PG, GE, etc…

At low enough prices, ANY stock becomes appealing… let alone the best-of-breed blue chips that everyone fancies right now… I can only hope we have another 2008/2009 buying opportunity like that again, but the consequences of such an event would also be devastating, in other regards…

Tough to have your cake and eat it too… But if that happens, we’ll be glad we have some cash available to take advantage. 🙂

Cheers!

Reply

13 Stan November 17, 2015 at 9:55 pm

Do you buy physical gold/silver ? if so where do you purchase it from ?
is it a good time to buy ?

Reply

14 beth November 18, 2015 at 3:24 am

I bought some stocks in Lundin Mining and Aecon (construction, oil, mining) during the small dips in the later part of the year. Now I am trying to get some cash together to hold until some unknown time next year when I think a larger correction or a lengthy slide down may occur.

When prices drop in 2016 I will be adding to my Canadian bank stocks and Vanguard ETFs and looking for bargains in the oil patch.

Reply

15 The Dude November 18, 2015 at 3:11 pm

Pretty much the same stuff: stocks (mostly index), cash flowing real estate, first position short term real estate debt, p2p lending on multiple platforms.

I think there are some deals out there. I’m a huge fan of AAPL and think it’s looking really attractive right now. They currently have 94% of mobile profits right now with only 14% of share, which begs the question: if nobody else is making much money, what will happen next? I think there’s quite a bit of growth left.

Reply

16 No Nonsense Landlord November 18, 2015 at 6:02 pm

I just keep buying a monthly allocation of IVV and paying down mortgages. It’s not glamorous, but I am up in my fidelity account 5.32% YTD with about 10% cash as of 10/31/15.

Meanwhile, the S&P is up only 5.2%. I beat it mostly due to dollar cost averaging.

Reply

Leave a Comment

Previous post:

Next post: