Stock plays in Response to Market Mediocrity

The basic premise of this video is capital preservation:

I have been squawking this for a while now among my investor circles.

Main trades:

-Energy: BP (if it hits 33 or under) and natural gas as it heads lower.

-Commodities: Gold and Silver

-Defensive: Walmarts, Dean Foods, etc


Summary:

I like these plays as they limit your exposure to Europe (besides BP but I believe oil will be headed up higher after this mess blows over). I am still bearish on Financials as any contagion fears as I have mentioned in the past could hit the financials as some of these Derivatives are deeply implicated by the big banks. If you are in financials look to limit your exposure as much as possible. Start looking towards the traditional banking types that are less leveraged like WFC, PNC bank, and some of your mid-size regionals.

I'm not a big fan of ETFs in general so I haven't studied UNG but if you want to play the nat gas segment I would look into KMI (Kinder MOrgan) which is a pipeline and Niko Resources (a canadian based co.)

I honestly think oil (as well as nat gas) has some room to fall so I do not recommend buying them atm. I think oil could go as low as 70-75 within a month and depending if the Fed comes out with a massive print before Optwist is over, then oil will likely shoot back up to upper 90s and the train could pull out before you get a chance to buy. Nat gas is likely headed back down to 2 on Nymex, so it has some room to fall as well.

So, your risk in picking up these nat gas plays is beholden atm to what the Fed may or may not do, US economic impacts, and Europe's woes. Imo, if the fed does do something, it is quite likely they will hint about it sometime this month or in July. The markets have another 5-10% to fall before the Fed really starts shaking in their boots. So look for the dow to be around 11-1l.5k before they really start amplifying their language.

My personal buy targets for KMI would be in the 28-29 range. Anything below that is a good buy as it offers a 3.70% div at its current price of 32.35. KMI at 28 a share would mean a div yield of 4.6% which is very attractive considering the horrendous 10y treasury. Niko looks attractive below 21 a share (its current price is 29.07). I give Niko a lower buy rating b/c of the uncertainty of how investors will respond to stocks with 0 dividend in a tumultuous time as now.

Keep in mind as investors flee euro based assets they will be looking for dividend payers that are limited to the impacts of europe's monstrosities.

That is why you see WMT popping the way it is. It is a defensive play that pays a 4.7% dividend. The big institutionals are looking for safe haven equities and assets.

It's time to build a moat.

FishFighter

Thank you for your response and to tell you the truth I don't blame you at all for being in 80% cash. The hysteria around 10 years is abysmal and it is likely headed even lower up to the decision (I believe around June 17) of whether Greece will exit or stay.

I told my dad to grab Goldcorp before it spiked yesterday and I am glad to hear you have been picking it up over the last month b/c that means you got it at a great price and you are situated nicely. It pays a 3% dividend as well and you are making the flight to safety play which in my opinion you will see a lot of people coming out of the bond market (when it collapses) go into gold and silver equities and physical bullion.

If you ever get an itching to buy another one, I suggest to take a peak at SilverCorp (SVM). They are at a great bargain price. They have no debt, a huge Proven and Probable reserve and best of all they are shielded completely from any type of European contagion as their main mining capacity is in China. (they are the first NA co. to be granted access to Chinese mining development)

Oh and another biggie, they don't hedge which means they have all the upside in the world and their silver cost per ounce is 0 b/c of the periphery metals they mine.

But that is not to say there are not risks as well. China in my opinion has its political risks which is why CEO Dr. Feng (who is Chinese) might be an undervalued asset by the market b/c he has the right connections thus far to have made it into China.

Keep your will strong in this time as there are going to be multiple times that it gets tested and now that you have pulled away from most risky categories, you have really done your mind and body a favor.

Anytime.

Nat gas had IMO an inexplicable run up to 2.50 ish. I would stay away from UNG till we have a catalyst- government backing or mandates, or increased private demand. There is a buttload of NG here.

If you want to hold UNG I would go deep out of the money calls in 2013 that way you limit your down side to what you pay in options premium. Upside far greater

bump.

I just realized that I suggested Kinder Morgan up above and there is likely some confusion on the stock I suggested.

The Kinder Morgan I am speaking of is ticker symbol KMI. It yields almost 4% and is around 31 a share. Anything under 30 would be a tremendous buy imo.