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HiddenLevers is the premier portfolio stress testing platform for financial advisors everywhere. Advisors use the correlations engine and easy user interface to help clients understand risk in portfolios, showcase hedging strategies, and compare portfolios in context of several macro­economic... More
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  • Oil set for correction… how should you play it?
     Crude oil has had quite a run over the past six months.  And with it, a great run for the oil refiners too. Valero (VLO) up 40%. Tesoro (TSO) up 75%. Frontier Oil (FTO) up 45%. Sunoco (SUN) up 28% – all over the past half year.

    Since July, many oil related plays have been doing well. But in my opinion oil is now due for a pull back. Usually crude oil trades inversely to the dollar. But a look at the 3m and 6m comparison between Oil and USD shows that they have been trading up together. Since November the US Dollar has been on a tear back up, largely due to fears of a European meltdown, and troubles in the Koreas.  The dollar is now in bullish consolidation after a run up into December, and the USD index could even make its way up to into the mid 80s. And as soon as the dollar goes northward again, I’d be ready for a correction in oil. A combination of profit taking and technical patterns playing out, Oil is overdue for a fall. And you can bet that these beloved oil refiners will ride that train down as well.

    So how should you play a correction in oil? Using the HiddenLevers screener, I just searched for stocks that go up as the price of oil goes down. I also set some other criteria in place – 1 billion usd market cap and decent volume trading per day (500k shares). I found a couple airlines, United (NYSE:UAL) and Continental (CAL) and it stands to reason. The airlines have gotten a bit beat down in December, and even more so just last week due to the great blizzard in the Northeast US. I’d look for a bounce back there as Oil corrects.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 04 3:46 AM | Link | Comment!
  • A year to remember for South Africa

    Anglo American (OTCPK:AAUKY) and the Rand (ZAR) have been two solid options for investors looking to dabble abroad. 2010 will most likely be remembered as the year where precious metals took off. A large part of Anglo American’s success can be attributed to the recent surge of Gold to record levels. Like the CAD and AUD, the ZAR is a currency driven by mineral speculation. The question one has to ask is whether Gold can keep this prolonged rally going? I personally believe this precious metal is in good position to keep these gains up well into the New Year.

    Mining is key to South African wealth -

    There are a number of reasons as to why I am so bullish on bullion, the main being uncertainty about the dollar. Last night’s filibuster over the Federal budget for 2011 comes at a time when critics (at home and abroad) are concerned with the manner in which the Obama administration and Congress plan to address the growing US deficit. If this sentiment continues it would be good news for both Anglo and the ZAR. Historically Gold does well when the dollar is in a weakened state. If this proves to be the case, look for the luster of ZAR and AAUKY to attract wary investors.

    Scenarion: Dollar Crash -

    HiddenLevers can help you find stocks based on where you see Gold and the Rand headed, among dozens of other economic trends. Or, if you are concerned with how your current portfolio would be affected by a weakening US dollar, HiddenLevers can help you understand how your investments would be affected in such a scenario. (subscription required)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 17 4:44 PM | Link | Comment!
  • With a new year, comes new opportunities

    Oracle beat the Street, while Cisco under achieved. But why?  I examined both Oracle (ORCL) and Cisco (CSCO) and found that they both bore strong correlations to IT spending and the S&P 500 (Both levers are currently trending up for the year). What irked me was why Oracle was performing above and beyond expectations, while Cisco was floundering. I found that the difference between the two tech giants was in their client base. Cisco is much more exposed to the US public sector than Oracle. 20% of Cisco’s revenue was derived from state and local governments which are trimming budgets bare.

    Good for ORCL, bump in the road for CSCO -

    Where Cisco once stumbled, could gradually become an opportunity. IT spending is expected to start trending higher in 2011. I personally believe these estimates are a little conservative, but I agree with view that growth in IT spending will be driven by cost cutting measures by both the public and private sector. Companies and governments recognize that maintaining their own IT services has just become far too expensive. Opting to the services of cloud computing mercenaries is simply cheaper. This trend in cutting cost also moves across the board to other services such as video conferencing which is far cheaper than travel costs and allows companies to expand into new markets just as effectively. Go figure: teleconferencing is a pillar in Cisco’s business strategy. With this in mind CSCO should start to catch up to ORCL in 2011.

    HiddenLevers can help you find stocks based on where you think IT spending growth is headed, or from dozens of other economic trends. Our macro profiles also let you know which economic levers are relevant for your stocks. Try it free for 30 days.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 17 1:59 PM | Link | Comment!
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