Investiv Daily

  • 16 Oct
    Doing This Could Increase Your Returns By $2.6 Million

    Doing This Could Increase Your Returns By $2.6 Million

    • It’s somehow accepted that stock returns have been between 8% and 10% in the past. That is correct, but only for a short period in history and it’s not true for all markets.
    • We’ll discuss stock returns over the past 100 years globally which will paint a different picture than what the predominant opinion would have you believe.
    • This doesn’t mean stocks are bad investments, you just have to understand how to go about them. After all, it’s your financial life on the line.



    Introduction

    Currently, most financial advisors will state that the best rational investing pattern is to invest in index funds as it’s impossible to beat the market, and that index funds have been a great investment vehicle over time.

    That would be a correct statement, but the returns that are noted by those who are trying to sell you an index fund are cherry-picked from historical examples. But the truth looks a little different. More →

  • 13 Oct
    Cocoa Prices Are Low, But Should You Invest?

    Cocoa Prices Are Low, But Should You Invest?

    • Cocoa prices are at multi-year lows.
    • I’ll analyze the supply and demand situation to see if there might be profit opportunities.
    • A cocoa ETF isn’t the only way to profit form cocoa.



    Introduction

    Investing in commodities is relatively easy compared to other stocks.

    As an example, to profitably invest in Apple (NASDAQ: AAPL), you should be able to estimate iPhone sales for the next few years. What’s difficult is that there are a myriad of factors that influence iPhone sales.

    But when investing in commodities, all you need to look at is whether there will be more demand than supply or vice versa.

    Where demand for some commodities is pretty easy to estimate, there aren’t that many factors that impact how much chocolate you’ll eat next year, and you’ll likely consume a similar quantity you ate last year.

    On the supply side, it all depends on the weather. Good weather and healthy crops increase supply, while bad weather lowers supplies and pushes prices up or down accordingly.

    Under the assumption that the weather and planting activities will always find a balance, it’s possible to invest profitably in cyclical price movements.

    In today’s article, we’ll discuss cocoa as it’s now at multi-year lows.

    Figure 1: Cocoa price in history. Source: Trading Economics.

    The current cocoa price is $2,045 per metric ton (MT), down from the $3,000 level in the period between 2014 and 2016.

    In 2013, there was a crash and the last time prices were below $2,000 was prior to 2008. If I go back to 1970, prices were around $1,000, and then again at the beginning of the 1990s. So at $2,000, cocoa prices are below the level that would cover for global inflation and could provide an excellent trading opportunity while also creating a commodity hedge for your portfolio.

    Let’s check the cocoa supply and demand forces to see what’s going on there.

    Cocoa Supply & Demand

    If the price of a commodity drops suddenly, it usually means that there is oversupply. A look at what the International Cocoa Organization (ICO) has to say shows exactly that.

    Figure 2: Cocoa supply, grindings, and stocks. Source: ICO.



    So the ICO has forecasted increased production of 18.1% for this year and higher stocks as there was a clear indication of a surplus of 382,000 MT.

    Additionally, cocoa bean arrivals to ports in Côte d’Ivoire reached 1.966 million tons as September 3, 2017, up by almost 35% (508,000 tons) compared with the 1.458 million tons recorded for the same period of the previous season.

    The ICO has discussing the weather where favorable weather conditions are reported to be boding well for the upcoming main crop in most of the West African region. Should the positive weather conditions prevail, then expectations are that there may be a second consecutive global surplus of cocoa beans in the next cocoa year.

    So it’s clear that there is, and will be, plenty of cocoa for a while. Therefore, some expect cocoa prices to fall significantly below $2,000 per ton which makes investing in cocoa now, just because it is at multi year lows, a very risky trade. You can’t fight nature, nevertheless, there are always ways to profit.

    Profiting From The Cocoa Price Slump

    The first way to profit from continuous oversupply is to short cocoa ETFs that track the price of cocoa through future contracts, the NIB (iPath Dow Jones-UBS Cocoa ETN) and the CHOC (iPath Pure Beta Cocoa ETN).

    Figure 3: The cocoa ETF looks cheap but could go lower. Source: Bloomberg.



    However, as cocoa, like any other commodity, is a cyclical, many farmers will probably cultivate fewer trees for next crop which, in combination with bad weather conditions, could lead to a deficit for next year. Thus, if you keep an eye on cocoa, you could make a profit.

    The indirect way of profiting is to look at stocks that use lots of cocoa as their margins will probably increase. An example of such a stock is Hershey (NYSE: HSY) where, depending on the price, cocoa makes between 10% and 15% of cost of goods sold. However, the stock is already pretty expensive, so it might be an idea to keep as a pair trade for when cocoa prices rise, short HSY/long cocoa.

    The Swiss Chocoladefabriken Lindt & Spruengli AG is even more expensive with a PE ratio of 38 and a dividend yield of 1.28%. The world’s leading manufacturer of chocolate and cocoa products, Barry Callebaut, is also expensive with a PE ratio over 30. Nevertheless, improving margins could make these stocks go even higher, and in the current market, anything is possible.

    Conclusion

    Just because something looks cheap, it doesn’t mean it’s a good investment. Investing requires a lot of research which mostly ends with a “no, thank you,” if you hold yourself to a low risk, high reward strategy.

    Perhaps it’ll be better to look at coffee for food commodity exposure as prices are also very volatile, but have clearer long-term cyclical trends. Keep reading Investiv Daily as I’ll share my research on coffee soon.

  • 12 Oct
    Want 20% Yearly Returns? Read Sven’s Top 10 Rules For Getting There

    Want 20% Yearly Returns? Read Sven’s Top 10 Rules For Getting There

    It’s relatively easy to get down to the financial metrics for every investment, analyze the company, and know what to expect.

    The difficult part isn’t finding good investments, it’s more about whether our mindset is ready to take advantage of the opportunities the market offers.

    In today’s article, I’ve summarized the investing rules that have helped me in achieving market-beating returns over my 15-year investing career. More →

  • 11 Oct
    How This Little-Known Theory Could Bring You Outsized Returns

    How This Little-Known Theory Could Bring You Outsized Returns

    • Stock prices haven’t been following fundamentals for 5 years now. The theory of reflexivity is the only one that can explain what’s been going on.
    • The main message is that as long as the trend is strong, don’t fight it, but reinforce it.
    • If you want to know when the current bubble will burst, focus on the twilight zone.



    Introduction

    One of the best traders and investors over the last 50 years has been George Soros. Whether you like him or not, his track record is something to respect and learn from whenever possible.

    In today’s article, I’ll describe his reflexivity theory in a, hopefully, much simpler way than Soros has described it in his book, The Alchemy of Finance. More →

  • 10 Oct
    7 Rules For Finding Stocks That Will Double

    7 Rules For Finding Stocks That Will Double

    • I’ll describe 6 stocks that have recently doubled that give us good guidelines on finding the next stock that will double.
    • If you do the research, it isn’t that tough to find stocks that will double or more. Perhaps the reason we don’t always find them is our psychology, predictably.
    • The analyzed stocks include a miner, a wealth management company, a social media company, an education company, a paper company, and a big pharmaceutical.



    Introduction

    I wrote an article not too long ago about where and how to find stocks that will potentially double or even become multi-baggers, and described a few sectors to look at to find these stocks.

    In today’s article, I want to dig a bit deeper and show you what should you look for in a specific stock that can indicate multi-bagger potential or at least a 50% return in a year, as Buffett used to do when he was younger. More →

  • 09 Oct
    Put A Ring On It – Why It Might Be Time To Invest In The Diamond Industry

    Put A Ring On It – Why It Might Be Time To Invest In The Diamond Industry

    • Diamond producers expect a supply gap to form from 2019 onwards, which is a great fundamental indicator.
    • However, the current environment isn’t the best, and has made miners cheap. Many of them are down more than 30% this year.
    • I’ll discuss mining costs, risks and rewards, how to invest, and analyze I’ll two miners.




    Introduction

    A recent Bloomberg article described how diamond stocks have performed extremely badly in the last year. More →

  • 06 Oct
    Analysts Love This Metric. Here’s Why You Shouldn’t.

    Analysts Love This Metric. Here’s Why You Shouldn’t.

    • EV/EBITDA is a widely used metric these days, so every investor should understand what it is.
    • We’ll discuss how EV/EBITDA is calculated and how you can manipulate it.
    • There are some pros to using it, but also some cons.



    Introduction

    When I was just starting with investing, I remember that the beta coefficient was popping up everywhere, next to almost every stock price or price to earnings ratio.

    The beta coefficient has faded in the last two decades as it was clear that markets aren’t efficient and that there is no real usage of the metric. Now a new metric has emerged lately and is used by most analysts. More →

  • 05 Oct
    The Electric Vehicle Trend Will Be Explosive – Here’s How To Profit On It

    The Electric Vehicle Trend Will Be Explosive – Here’s How To Profit On It



    • The latest news surrounding the electric vehicle market is extremely positive.
    • However, not every related investment will do well. We’ll discuss car manufacturers, graphite, cobalt, nickel, copper, and lithium.
    • There’s one way to profit from the growing trend that carries little risk, is already profitable, and definitely offers high upside in the next decade.

    Introduction

    We all know transportation will be electric in the future. However, this doesn’t mean that every investment in the sector is a smart investment.

    A great example of how investments in hot trends can work out is Amazon (NASDAQ: AMZN), and this example is the best-case scenario out there. More →

  • 04 Oct
    The New Silk Road Will Change Everything – Here’s What You Need To Know

    The New Silk Road Will Change Everything – Here’s What You Need To Know



    • What’s going on in Asia isn’t news that sells. But the consequence is that we are poorly informed about the groundbreaking One Belt One Road project.
    • Lack of and poor information doesn’t allow for proper capital allocation and international diversification.
    • We’ll discuss what’s going on in Asia and how you can profit from it by buying foreign but also domestic stocks.

    Introduction

    What we’re mostly focused on now will probably be completely irrelevant in a few years and will almost certainly be in fifteen years.

    Most of the market related talk now focuses around possible tax reform or similar incentives. As these are short term factors and the economy offers no free lunch, nobody knows how those probable measures will actually impact the economy and stocks. More →

  • 03 Oct
    Good Debt Explained: Why You May Want To Take Out A Loan To Invest

    Good Debt Explained: Why You May Want To Take Out A Loan To Invest



    • Investing isn’t only about choosing the right stocks, it’s also about proper capital allocation.
    • Taking on leverage to invest can be smart but it can also be incredibly dumb.
    • From an historical perspective, it could be a very smart thing to be ready to refinance your home and invest in stocks.

    Introduction

    Buffett and Munger praise themselves for never taking out loans for Berkshire and one of the most famous Buffett quotes is:

    “If you’re smart you don’t need debt, if you are not smart, you better stay far from debt.”

    However, this is another half-truth that he tells the world. More →

1 2 3 4 45