eersing's  Instablog

Trading Strategies

Some are active, and some are passive, but the fundamental framework for successful trading starts on research. Whether holding positions for long term expected growth, or buying and selling off based on technical analysis and historical performance, backing your decisions with educated research separates blind betting from informed investing.

In my personal portfolio, I like to divide funds into two different categories. One being long term positions that I buy and hold for a minimum of 8 months. These positions are placed after due diligence has been performed on certain companies and sectors. After isolating a sector that has the potential for growth over the next 1-5 years, companies with high growth potential can be investigated. For example, historically, as incomes rise, and economies develop, there is a higher demand for a higher quality of meat. The most basic meat being chicken, has been a staple for street vendors in China. However, given that the economy is strengthening, and more individuals are finding greater wealth, it can be reasonably expected that there will be a rise in demand for higher quality meats such as beef. Provided that this industry outlook is true, researching the companies that have to gain from this can be a good play. Taking this idea one step further, there are not currently many beef producers in China, but there are distributors. Herein lies two directions to investigate. The distributors, or producers? Major beef imports to China come from primarily New Zealand or Australia. Given this knowledge, the companies that benefit from an increase in demand for beef in China, presumably lie in these countries. Companies such as JBSAY, or Market Vectors Agribusiness (MOO), may be potential gainers if this expectation holds true.
If we look at it from a domestic point of view, the meat packaging companies may gain from this newly found demand. Companies such as Zhongpin (HOGS), Hormel Foods (HRL), or Smithfield Foods (SFD), stand to gain in these regards.

Long term projections based on diligent, and thought out processes of the business environment keep investors ahead of the curve. Once the dominoes start falling, it is easy to see which ones have already been knocked over, where investors gain, is knowing which one will be hit next.

Disclosure: I am long HOGS.