Finding some glitter among gold-mining stocks

Gold bugs and non-gold bugs are puzzled over the apparent disconnect between gold prices, gold mining stocks and stock market bullishness.


But even if sky-high investor bullishness can't lift gold prices, a move might come at the hands of Swiss voters next week, when they will decide whether the country's central bank will be required to keep a fifth of its assets in the precious metal.

Some predictions forecast that if the referendum passes, gold prices could spike by as much as 18% to more than $1,350 an ounce.


Even though such a move would likely satisfy frustrated gold investors, it still wouldn't answer the question of why gold prices have been flat this year in U.S. dollar terms while so much geopolitical chaos and financial market risk makes the case for higher gold prices.

“Right now, everybody believes the same story, and that's how you get to a place like this,” said Janet Briaud, founder of Briaud Financial Advisors. “Nobody is interested in gold with the stock market going crazy like this, and we're also in a world where it seems like the Fed has got your back. The narrative is that there is no risk out there.”

Mr. Briaud isn't buying the narrative, but she is buying gold. Over the past few weeks she has increased her client allocations to gold to 7.5%, from 5%.

“I think gold is cheap and there are a lot of scary things out there right now,” she said.

Keith Trauner, manager of the GoodHaven Fund (GOODX), is not necessarily focused on gold prices, but he has noticed the way some mining stocks are trading at steep discounts to physical gold. And he knows that mining stocks benefit when gold prices climb.

“What intrigues us today is that monetary authorities around the world are trying to cheapen currencies and create inflation, and if they're successful, gold should do pretty well and if they're unsuccessful, gold might do OK,” he said.

With that in mind, Mr. Trauner feels comfortable with his investment in a mining company stock such as Barrick Gold Corp. (ABX), even though the stock price is down 32% this year, following a 48% drop last year.

The mining stocks are “an interesting place to look because the price of a lot of companies in the area are down a lot, but in dollar terms gold has been even over the past year,” he said. “It sort of suggests something is out of whack, and it's really about the disconnect between the metal price and price of the mining-company securities.”

Ms. Briaud typically gets her gold exposure through the SPDR Gold Shares ETF (GLD), but said she will occasionally invest in mining stocks through the Market Vectors Gold Miners ETF (GDX).

GDX is down 18.6% since the start of the year, and fell by 54% last year.

“If gold goes up, gold-mining shares should do fine,” Ms. Briaud said. “If somebody really wants to take a risk, that makes a lot of sense.”

Another way to approach the mining space during these times of uncertainty would be the Sprott Gold Miners ETF (SGDM), which is a smart-beta strategy that has outpaced GDX by 4 percentage points since it launched in May.

As with any smart-beta strategy, it's all about the methodology. In this case, Sprott Inc. executive vice president John Ciampaglia explained that the focus is on revenue growth and leverage levels.

“You end up getting an index that looks a lot different than the cap-weighted version,” he said.

The focus on revenue helps distinguish which mining companies are producing each quarter, and leverage is an important factor in a capital intensive industry like mining, which can make companies more vulnerable in down markets, Mr. Ciampaglia explained.

The fund's smart-beta strategy puts Franco-Nevada Corp. (FNV) as the largest holding in the ETF. Franco-Nevada shares are up 37% from the start of the year, rebounding from a 27% decline last year.

Barrick Gold, which is among the largest positions in the market-cap-weighted GDX ETF, is among the smallest positions in the Sprott ETF.

Source Url:http://www.investmentnews.com/article/20141126/FREE/141129936/finding-some-glitter-among-gold-mining-stocks

5 rules for a smart investment strategy

Financial priorities change over one's lifetime. But the principles that make for a good plan stay consistent. Here are five suggestions on how to have a smart investment strategy.

1) Avoid cookie cutter solutions to your asset allocation.

Once you get the broad principles in place, fine tune it to suit yourself. For instance, equity is a must to defend your portfolio against inflation and build wealth. But how you apply it will depend on your personal situation.

Take two individuals in their thirties earning the same salary. One has a number of dependents and is saving for the downpayment of a home two years down the road. The other has no dependents and no siblings, lives with his parents in a huge house, and has no intention of moving out. Naturally, the latter’s equity allocation would be much higher despite both being the same age and earning the identical salary.

Don’t blindly follow the age rule for equity and debt allocation. Take your risk profile and your investment goals into account. If you are saving for retirement, the equity allocation would be much higher than if you were saving for a home to be bought in the next few years.

2) Tips are for waiters, not investors.

Cynicism isn't a particularly positive attribute, but it has its place. Be cynical of tips when it comes to investing. In fact, it makes sense to avoid them altogether. When investing in stocks, you need to make an informed decision. Besides tips, avoid hunches and speculation. Don’t risk gambling away your savings.

To be a successful stock market investor, you need to think and behave like an owner. If you are buying businesses, it makes sense to act like a business owner. This means reading and analysing financial statements on a regular basis, weighing the competitive strengths of businesses, as well as having conviction and not acting impulsively.

It also means you have to pay wisely for quality. The difference between a great company and a great investment is the price you pay. Always have a margin of safety built in to any stock purchase you may make.

3) Don’t go overboard with too many funds.

We are not against diversification, but don’t misunderstand the concept. Diversification does not mean you become a fund collector. It is not about the quantity of holdings but how well they balance each other out. Good funds combined in the wrong way can make a bad portfolio. Use our Instant X-ray tool and you may be surprised at the overlap within your portfolio.

Avoid buying all the schemes from one single fund house. Never cast your lot with just one type of investment or one type of fund. Spread your investments across assets, regions, sectors, and investment styles. One year’s ‘hot topic’ can become the next year’s dud. Anyone invested fully in one area takes the risk of watching their portfolio swing violently between notable gains and substantial losses.

4) Start now.

Procrastination is a bad trait in itself, but can be disastrous when it comes to investing. Procrastinate on your diet if you need to (not that we are suggesting it). But don’t delay on your savings plan. The longer you wait, the more it works against you. Compounding is a mathematical computation that works with time on its side.

Don’t wait for your next bonus to invest. Also, as your salary or income increases, let the allocation to investments also rise. The more you delay, the more it reduces the amount of time your money has to work for you. If you had invested Rs 2,000 per year over a decade, the value of your investments at the end of the time period would be far greater than had you started investing Rs 4,000 per year halfway through that period.

5) Don’t trade on the headlines.

Staying focused on your goals and investments. Don’t let your emotions and those of the crowd carry you away. Markets will rise and fall and stay volatile. Don’t try to ride those waves. Stay systematic and methodical with your investments. Avoid churning needlessly.

It’s difficult to ignore your emotions completely but the statistics prove that stock performances over time tend to improve and come back. So one must stay the course.

As Charles Ellis, the legend amongst index fund managers, stated when on the subject of investors’ emotions. “When you feel euphoric, you are probably in for a bruising. When you feel down, remember that it is darkest just before dawn and take no action. Activity in investing is almost always in surplus.”

The key message here is threefold: taking a long-term view is important because it reduces the impact of volatility; trying to time the market leads to slip-ups; and diversification is very helpful for spreading risk.

Source Url :http://www.morningstar.in/posts/29297/5-rules-for-a-smart-investment-strategy.aspx

10 Important Trends in Startup Internet and Technology Business

We are entering an exciting new era for innovation and technology that is full of unmeasurable potential and opportunity. Not only does this apply specifically to the internet, but goes beyond it in many areas of business and technology. For the startup, investment and job markets, it means a climate for fresh new areas. For legacy businesses, it can mean new growth and expansion potential.

10 trends to watch:

1. Internet Of Things: The internet as a technology infrastructure has the ability to be connected to any object, both fixed (stationary) or mobile. This includes products, devices, and objects of all kinds, shapes and sizes -- appliances, automobiles, buildings and other structures, wearable technology, mobile devices and much more. As the development of products connected to the internet increases, the demand for software and other technology to support it is imminent.

2. Security And Access Control: With the arrival of the Internet of Things and other key internet and technology trends, the need for new security and access control solutions will increase. Watch for this to also leap into the offline world as access control and security solutions evolve for the home, office, buildings of all kinds and vehicles across the spectrum for both consumers and businesses.

3. Digital Payments: Digital payment technologies have been gaining momentum for the past few years. The arrival of Apple Pay has sparked increased attention and movement in this area of technology business, and this will only continue in the future. Keep an eye also on new payment hardware solutions in addition to software, particularly around the connected home and retail business.

4. Offline/Online Integration: A flurry of startups around the integration of the web and offline world such as Uber has showed the promise of connecting the digital and physical world. While this has remained heavily in the consumer and personal services markets to date, we will see it likely move into more B-to-B and business-related applications, opening new opportunities for ideas and innovation.

5. Increased Cloud-Based Products and Services: Internet-based solutions such as email and data storage are not new to consumers or businesses today. However, we are entering a new era in the cloud-based technology market as both category of users continue to grow increasingly savvy with this area of the industry. Watch for this to expand into communications, content distribution and a variety of new and unexpected products and solutions, particularly in the business arena.

6. 'Smart' Wellness: Wearable technologies centered around consumer fitness are only the beginning. There are new internet-connected products and solutions emerging in across personal fitness and wellness, from helping us get a good night's sleep to tracking whether or not we eat too quickly. We may even see our smart phones tallying up calories as we shop for food items at the store, and many other exciting applications. It will open up opportunity for new startups and technology.

7. New Communications: The internet enables a wide range of communications capabilities. It has been predominantly text-based to date, but internet-based video and voice communications are also used and will only increase. While video communication has been relatively limited to laptops and traditional PCs, and voice to VoIP-enabled stationary telephones, all will move to mobile devices -- as well as cars and other vehicles, buildings and more -- in the coming future. Watch also for the decline in use of both the traditional 'landline' and 'cellular' platforms, replaced by the internet for communications. While startups may struggle proliferating this market, there should be opportunity in creating new innovations for carriers and telcos in this space.

8. 'Smart' Government: When we think of 'smart' technology in the government and law enforcement environment, it is often in websites and mobile connectivity. But a new era of internet-connected law enforcement and government startups are going beyond this to web-connected weapons, vehicles, and other technologies that can track and monitor use, activity and location, etc. We will also see new ideas and innovations in government information, reach, and other solutions from startups in the near future.

9. Green Tech/Clean Tech/Cause Tech: The past few years of technology and ideas among startups has been widely centered on consumer applications for fun and entertainment. However, new and emerging companies are utilizing technology to solve problems that now go beyond the traditional green and clean tech arenas such as growing and distributing food, eliminating excess and waste and a wide range of other problems throughout the world.

10. Education: The education technology market has held promise for years. But, today it is increasing and evolving in exciting ways like never before. Startups centered around improving the learning experience, empowering students and teachers, etc. are on the forefront. But also there will be new companies that help the country's entire education infrastructure, education administration and other areas as well. Watch for a lot of investment to increase in this market in the coming years.

Source Url : http://www.huffingtonpost.com/kira-makagon/10-important-trends-in-st_b_6216338.html

Opinion: Your two best trading strategies for the holidays

Small-cap stocks and closed-end funds have proven to be winners this time of year

Americans on Thursday will sit down at their Thanksgiving dinner tables before rushing out to score Black Friday deals at the mall.

And so will begin a five-week orgy of shopping and eating that culminates in a hangover on New Year’s Day.

The markets also typically imbibe the holiday spirit: December and January are two of the best months for stocks. I expect this year to be no different.

The holiday season is particularly good for small-cap stocks and closed-end funds. And although I rarely focus on short-term trading strategies, those two have such solid track records that they’re worth exploring.

Their outperformance is connected with the so-called January effect, which was first identified in 1942 by Sidney Wachtel. He noted that U.S. small-caps (these days, stocks whose market value is less than $2 billion) outperform larger stocks in January.

‘If you buy in December and wait a month, you can make a really good short-term trade. Eight or nine years out of 10, that’s a pretty predictable trade.’
Thomas Herzfeld, investment adviser
Why? Investors sell losing stocks in December to rack up capital losses to offset capital gains from other investments, thus reducing their tax liability.

Trouble is, the January effect became so familiar that investors began buying small-caps in December in anticipation. So now, “it’s not a January effect per se anymore,” said Jeffrey Hirsch, editor of the Stock Trader’s Almanac. “Most of the January effect happens in mid- to late December.”

In fact, some years ago, the Chicago Board Options Exchange re-dubbed it the December/January effect.

Whatever you call it, the data behind it is pretty strong. According to Hirsch, between 1974 and 2012, a portfolio of small-cap stocks that hit their 52-week lows in mid-December outperformed the NYSE Composite Index “by an average 9.5 percentage points (not annualized!) per year between late December and the January/February period.” And they did so in 33 out of the 38 years studied.

So, are small-cap value stocks the way to go? Well, for the long run, yes, but Hirsch said during the seasonal trade, leadership changes year by year. “If you’re going to play the small-cap effect, you just buy small-caps,” he told me. You can use the iShares Russell 2000 ETF IWM, +0.08%

This year, the Russell 2000 small-cap index peaked in early July and then had a nasty correction that ended in mid-October. It’s rallied 13% since, but Hirsch calls it “a very typical end-of-October rally” and expects to see small-caps outperform again through mid-January, when he typically unwinds his positions.

Another time-tested seasonal trade involves closed-end funds, mutual funds that issue shares once at their public offering and then trade like stocks.

There are around 600 closed-end funds with a total market capitalization close to $300 billion, so their average market capitalization is roughly $500 million — solidly in small-cap territory.

But daily price fluctuations cause closed-end funds to trade at premiums or discounts to their net asset values (the value of their holdings), and that’s where the trading opportunity comes in.

Year-end tax selling reduces demand for closed-end funds and “because closed-end funds’ share prices depend on supply and demand, the discount widens,” said Thomas Herzfeld, chairman and president of closed-end fund specialist Thomas J. Herzfeld Advisors in Miami Beach. He started following closed-end funds in 1968, the year Richard Nixon was elected president.

This year’s September-October stock market correction hit closed-ends “very hard,” Herzfeld told me. “We were fortunate to buy a lot of those.”

But he added, “I don’t think that was tax selling; that was panic.”

By mid-January, said Herzfeld, discounts narrow again as investors take profits from this seasonal trade.

One area he’s looking at now: new issues. “They are typically brought to market at a premium, [but] it’s not unusual to see 15%-20% discounts in new issues.” In particular, the battered energy sector is ripe for a rebound, he said.

Bond funds comprise more than half of all closed-end funds. Herzfeld doesn’t consider them good long-term investments, but noted that the “discounts are widening” there now.

His firm has a mutual fund, Virtus Herzfeld VHFAX, +0.17% which invests in closed-end funds. It’s small and only two years old, so do your research.

“If you buy in December and wait a month, you can make a really good short-term trade,” said Herzfeld. “Eight or nine years out of 10, that’s a pretty predictable trade.”

He expects the normal seasonal pattern to unfold this year, too. “It’s shaping up pretty well,” he said.

Source url:http://www.marketwatch.com/story/your-two-best-trading-strategies-for-the-holidays-2014-11-24

AAPL, GOOG & TSLA: 3 Hot Tech Stocks to Watch This Week

The Nasdaq has been marching pretty steadily higher over the last month as hot tech stocks ride the broader market’s upward momentum — a trend that brings the index’s 12-month gains to a not-too-shabby 18%.

A few specific hot tech stocks have made some pretty big headlines in recent days as well, including behemoths Apple (AAPL), Google (GOOG, GOOGL) and Tesla (TSLA). Let’s take a quick look at what news makes these three giants are some of the top tech stocks to watch this week.

Source: GrabPress

Hot Tech Stocks to Watch: Apple (AAPL)

If you’re impressed by the Nasdaq’s gains, you’ll be blown away from the show Apple stock has put on of late. Over the last 12 months, shares of AAPL have notched a 56% climb, including a 45% improvement in 2014 alone.

That head-turning performance, along with the natural follow-up question of whether it can continue, is in itself enough of a reason for Apple to be one of the top hot tech stocks to watch this week, and in weeks to come. But making things even more interesting is the question that Forbes contributor Mark Rogowsky posed in a post yesterday. Can Apple be the first trillion-dollar company?

As he wrote:

“At least five analysts have upgraded price targets on Apple…In the meantime, the company has seen its shares reach an all-time high of $117.57 before closing out the week at $116.31. That price gives Apple a market capitalization of $680 billion — more than Microsoft (MSFT), Amazon (AMZN), Netflix (NFLX) and Twitter (TWTR) combined.”

Granted, a $680 billion market cap is still a good bit off of the $1 trillion mark … and Rogowsky runs through a substantial list of things that could go wrong. But even with that arbitrary mark off the table, the run up in Apple stock is definitely one to keep an eye on.

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• You Can Still count On Microsoft, Intel and Cisco

Hot Tech Stocks to Watch: Google (GOOG)

The next entry on our list of hot tech stocks to watch doesn’t have quite as much positive momentum in its corner at the moment. Google stock is currently sitting in the red year-to-date, and the most recent big news out of the search giant is hardly good.

Reuters reported on Friday that the European Parliament is “preparing a non-binding resolution that proposes splitting Google’s search engine operations in Europe from the rest of its business as one possible option to rein in the Internet company’s dominance in the search market.”

Shares of GOOG didn’t budge on that news in particular, but it’s definitely concerning for investors.As Search Engine Land noted, “the move represents an escalation of anti-Google sentiment and rhetoric.”

Hot Tech Stocks to Watch: Tesla (TSLA):

Last on our list of hot tech stocks to watch this week is Elon Musk’s Tesla Motors (TSLA). Tesla stock is down more than 5% in the past three months, including taking a beating of more than 2% on Friday alone. But that was before news broke this weekend that the automaker is in talks withDaimler’s (DDAIF) BMW over a possible partnership around batteries and light-weight components.

Since the news is just of “talks,” Tesla stock investors should keep an ear to the ground, as an actual deal could get shares rolling in the right direction again.

Source Url:http://investorplace.com/2014/11/aapl-goog-tsla-hot-tech-stocks-to-watch

Acting More Like A Start-Up Makes Microsoft A Better Investment

The practice of business strategy as it’s been taught in business schools puts big companies at a competitive disadvantage to startups. Amazon andGoogle GOOGL +0.31% grew from startups to giants with that realization firmly in mind.

But CEO Satya Nadella seems to be makingMicrosoft MSFT -0.76% more agile by replacing the old concept of strategy with one that lets successful startups win market share — learning fast from frugal experiments. And this change in strategy makes me more optimistic about the value of its future cash flows.

Before getting into why Microsoft looks more attractive as an investment, let’s look at the field of business strategy and how some big companies are adapting to the way startups practice it. The key insight is that the traditional way that big companies practice strategy slows them down — reducing perceived career risk but giving startups a huge competitive edge.

How so? In big companies, strategy has traditionally been an affair that involves an executive steering committee and a team of consultants.

The consultants spend six to 12 months analyzing the attractiveness of a potential market, evaluating the capabilities needed to win in that market, assembling the resources needed to master those capabilities, detailing the action steps to implement the strategy, and building a robust financial model that estimates the investment required and the strategy’s expected return.

Two years ago, I published Hungry Start-up Strategy based on interviews with over 160 entrepreneurs. What I found is that startups don’t have the time for this concept of strategy because they could easily burn through their remaining cash in the time it would take to get this process started.

As a result, startups take their two best guesses about the right strategy; build quick, cheap versions of the products that represent those guesses; put those versions in front of customers and measure the response. Startups learn from those responses and try again.

In the time it takes a big company to go through its six to 12 month strategy process, a startup has tried six or seven different strategies — each one better than the one before. The result is that as a result of their lower resource levels, startups have much faster clock speeds than big companies.

I have given talks on how big companies can get back their startupness. What is nice to see is that Microsoft — which I am assuming has not seen my work – is starting to follow some of the principles I talked about.

This approach is starting to appear in Microsoft’s Azure business unit that operates its relatively fast-growing cloud computing unit — according to Microsoft’s latest 10Q, its revenues rose 13% in the quarter ending September 2014 – that Nadella helped to get off the ground.

Some organizations are starting to operate in a way that mirrors how cloud computing works. According the New York Times, “In cloud computing, computer servers are pooled through management software. Power is dialed up or down depending on the workload, and the system is continually reconfigured, based on data about the next workload. To see how this changes a workplace, look at the structure of the biggest cloud companies around.”

Microsoft is starting to do just that. As David Campbell, the head of engineering at Microsoft Azure told the Times, “You learn to harness feedback. Early on, this means lots of ‘A/B testing,’ or putting up two versions of a website to quickly see which the customers prefer.”

Azure adapts based on customer preferences. According to Campbell, Azure “makes engineering changes by moving parts of its customers’ traffic into the new stuff, seeing if that works as predicted and then building up. Checking expectations and hypotheses in real time takes hours, instead of months and years in the legacy world.”

The result of this new approach is that Microsoft Azure is introducing more new products faster. According to Campbell’s Times interview, over the previous quarter, Azure delivered a new feature or service every “every two days.”

The result of this is a radical change in the practice of strategy — letting market response to cheap experiments prevail over a battle of managerial egos. As Campbell explained, “Instead of having a debate informed by decades of experience around whether a customer would want A or B, we define a testable hypothesis, which we quickly try to validate.”

This all sounds promising — but Microsoft has not worked out all the kinks. After all, on November 17 Azure went down for 11 hours. The BBC wrote about how this hurt clients – preventing health care workers from accessing their email and documents and making a social media startup’s site go dark.

Jason Zander, a corporate vice president with Microsoft Azure, wrote in a blog“When we have an incident like this, our main focus is rapid time to recovery for our customers, but we also work to closely examine what went wrong and ensure it never happens again.”

If Microsoft can indeed learn from this mistake — and incorporate this new concept of strategy across the entire company — I expect its revenue growth to rise — and given its 23.4% net profit margin that would be good for Microsoft investors.

Source Url:http://www.forbes.com/sites/petercohan/2014/11/24/why-the-death-of-strategy-makes-microsoft-a-better-investment/