Saturday, October 20, 2007

Use Weakness to Buy Quality

The recent market weakness has provided a great opportunity to initiate positions in high quality companies. Global agricultural demand will not be affected by problems in the credit markets. Demand for wheat, soybeans, corn, and rice will continue to remain strong. The best stock to own is Mosaic (MOS). Owning shares of Mosaic will give you exposure to crop nutrients and fertilizers. Earnings should grow 15% annually for the next three years. Mosaic has already prepaid $700M in debt since 2005 and has signaled to the markets that cash flows will remain strong. Compared to its peers, Mosaic is undervalued and should be accumulated on any weakness.

Note: I am long MOS

Monday, October 01, 2007

Invest Globally

The Fed's policy of fighting the subprime crisis with lower interest rates means higher returns for international stocks held by US investors. Lower interest rates in the US is keeping the US dollar index at historic lows. Therefore it will take more dollars to buy foreign stocks.

The conservative approach would be to invest in developed international stocks. The best way to do this would be to purchase shares in the iShares MSCI EAFE ETF (EFA) or the Vanguard Europe Pacific ETF (VEA).

The more aggressive approach would be to invest in international stocks of emerging countries. I would consider looking at iShares MSCI Emerging Markets ETF (EEM) or the Vanguard Emerging Markets Stock ETF (VWO).

Personally, I prefer owning particular stocks over the ETF's. I currently have positions in CVRD (RIO), Banco Bradesco (BBD), and CNOOC (CEO).