External Publications - 11/22/2011

One article is published on SeekingAlpha.com today:

• Why It's Time To Buy Energy: Our latest check shows that it’s time to buy the energy sector (XLE). We also suggest selling short the utilities sector (XLU) for investors who can hold short positions. (a) XLE is the top ranked sector ETF by our fundamental ranking system. And XLU is ranked at the bottom. (b) Our sector rotation road map shows that we are in early expansion, which favors strategies of buying offensive sectors – XLE in our case. (c) As the volatility is edging lower, we prefer to sell short defensive sectors to fund a long position, rather than sell short offensive sectors to reduce volatility. (d) Energy price is trending up. This will benefit the energy sectors and punish utilities.

External Publications - 11/8/2011

One article is published on SeekingAlpha.com today:

• Thompson Creek: The Best Company in the Most Undervalued Industry: Thompson Creek Metals Company Inc. (TC) stands out in our search for the best investment opportunity: (a) Metal mining is one of the most undervalued industries by our calculation; (b) Thompson Creek has outstanding financial strength in the metal mining industry; and (c) Thompson Creek has a diversified portfolio, including safe haven bets such as gold and silver, and growth bets such as copper, plus strategic metal molybdenum, which saw stable demand even during the 2008-09 crisis.

External Publications - 10/30/2011

One article is published on GuruFocus.com today.

• The Right Way To Estimate Industry Ratios: Industry ratios are more important than those of an individual company. A low PE ratio of a company could be distorted by various one-time items thus may not reflect the real earnings power of the company. But a low PE of an industry is often a sure bet for a structural opportunity. One-time items will positively impact some companies in the industry while negatively impact others. Those will cancel out one another. Likewise, some companies will adopt aggressive accounting schemes and others with conservative ones. Probability theory dictates that the "average" of a group of numbers resists the errors that may severely impact individual ones. With less error, industry ratios are more likely to reflect the industry's financial strength...

External Publications - 9/20/2011

An article is published on SeekingAlpha.com today:

• New Solid State Drive ETNs Are Good Buy: Best investments are often found with solid fundamentals and creditable growth prospects. The newly incepted Solid State Drive ETNs are promising candidates.

External Publications - 9/19/2011

One article is published on SeekingAlphs.com today:

• Why The Technology Sector ETF XLK Is Riding High: The Technology SPDR ETF (XLK) is ranked at the top among sector ETFs and that indicates the economy is likely to expand on its own.

Top 3 on SeekingAlpha

Now I'm ranked as the top 3 "Opinion Leader" for "ETF Long & Short Ideas" on SeekingAlpha.com. Just dumped screenshots as a reward to myself. My pen-name on SeekingAlpha.com is Diffusion.

External Publications - 9/8/2011

One article is published in SeekingAlpha.com today:

• Bet Against Unfounded Enthusiasm For Dividends - Pay More Attention To Quality: A company issuing dividends alone does not necessarily mean you should invest. The latest enthusiasm for dividends drove the iShares Dow Jones Select Dividend ETF (DVY) to an overvalued state.

External Publications - 9/1/2011

One article published today on SeekingAlpha.com

• Why MOO Will Stage A Swift Rally: We see four reasons that the Market Vectors Agribusiness ETF (MOO) will stage a swift rally.

SeekingAlpha Selected My Article on Its Front Page

Just dumped a screenshot.

External Publications - 8/30/2011

One article is published on SeekingAlpha.com today:

• 5 Reasons Emerging Markets May Not Live Up To Expectations: The widely expected growth of emerging markets could be already baked into the price, and investors will suffer if these markets fail to deliver.

External Publications - 8/22/2011

One article is published on SeekingAlpha.com today:

• One More Thing Investors Need To Know About REITs: Low interest rates are not the only thing that determines the fate of REITs. They depend on functioning capital markets to stay afloat.

More Evidence on the Flagging Demand for Gold

While all the comments are negative to my latest SeekingAlpha article "Why Market Peak May Have Passed for Gold and Its Miners", Barron's posted a blog that provided another piece of evidence on the flagging demand for gold "Global Gold Demand Drops In Q2 As ETF Investments Fall". This is really an interesting experience.

External Publications - 8/18/2011

One article is published on SeekingAlpha today:

• Why Market Peak May Have Passed for Gold and Its Miners: Gold miners’ diminishing return on asset (ROA) could indicate flagging demand for the precious metal.

External Publications - 8/12/2011

One article published on SeekingAlpha.com today:

• Hide in the Semiconductor Industry's Thick Pile of Cash With This ETF: By our calculation, semiconductor companies are hoarding a thick pile of cash that is equal to 21% of their stock prices. That’s where investors want to hide when future is uncertain.

External Publications - 7/25/2011

One article is published on SeekingAlpha today.

• Long Energy, Short Financial ETFs Play: Readers of my ETF ranking articles should know that I’ve been advocating a simple long energy (XLE)/short financials (XLF) strategy since May. The strategy returned a combined 5% since inception while the market, represented by S&P 500 (SPY), registered a -1% return...

External Publications - 7/18/2011

One article is published on SeekingAlpha today.

• Economy Is Better, but Banks Will Remain Under Pressure: Although last week there was good news from banks’ earnings reports, their stock price will be under pressure in near future...

Valuable Analyses from a Reader and a Fundamental-Weight Cloud Computing Portfolio

Poppedcollar, one of my readers on SeekingAlpha posted excellent comments to my latest article: "The Growth Perspective of the First Trust ISE Cloud Computing Index Fund, SKYY". He gave insightful analyses on the prospect of cloud computing and a couple of selected companies. I'd like to copy them over.

Personally, I think MSFT, GOOG, INTC, WDC and STX all provide very safe exposure to a bullish cloud computing environment. WDC and STX may seem like a bit of a stretch but I seriously doubt any company would run a cloud with SSD. It's too expensive and too unstable. Regardless, I see WDC and STX being undervalued in any environment that will arise. Desktop PC's are far from dead and will remain a staple of personal and business computing. Tablets and smartphones are just an addon.

MSFT is another company I see being profitable from any angle. Software is always useful and Microsoft dominants from this angle. Windows sales may drop (though this is due to PCs being upgraded less frequently, not that PCs are being less frequently used) but I think Microsoft will easily cover this in other areas including cloud computing.

Google also follows the same reasoning as Microsoft with some added speculative hope for social networking. Honestly, I've been tinkering in the Google+ beta and its fairly lackluster right now but a few easy fixes and it could be significantly better than Facebook. Google (unlike Facebook) might also have some opportunity to monetize social networking by being able to draw for information about consumers. Facebook has...well a profile. Google has gmail and Youtube accounts. Youtube finds recommended videos that fit things you watch. This produces good demographics for someone posting an ad and as such, ads on Google+ will have much better targetting ability and generate a justifiably higher price tag.

Intel simply dominates the processor market and I foresee it also doing well in other forms of computing (particularly clouds). They are the best of the best in servers and any gaming oriented machine.

I'd play the software/supply angle which also captures other markets. I think it also captures the market better than a business that offers a service that may or may not be related to cloud computing (IE If it can be run off a normal network, it really isn't cloud computing).

And below is my reply:

I've checked my ranking system for the ranks of those companies. The ranks are listed below. It appeared that MSFT, INTC, and WDC are good value pick as for now.

• MSFT - 81.95
• GOOG - 57.05
• INTC - 86.70
• WDC - 79.11
• STX - 73.65

Actually another idea popped up while I'm writing this. We can create a fundamental-weight portfolio. The idea is buy low sell high. A company with higher rank is supposed to be "cheaper" than that with lower rank. So we want to load up more. The average rank of the market is 50. So the weight should be proportional to a company's rank minus 50. If its rank is less than 50, then it is expected to underperform the market and there is no reason to hold it.

Thus the weight of each company should be

• MSFT - 24.87%
• GOOG - 5.49%
• INTC - 28.57%
• WDC - 22.66%
• STX - 18.41%

The rank is updated each week (because price change will affect valuation and thus the ranks). So it's better we rebalance this portfolio each week. The concern is trading cost, which can be reduced by a longer rebalance period.

External Publications - 7/11/2011

Two articles are published on SeekingAlpha today:

• Moving Into Earnings Season: Staying Long Energy, Short Financials: Alcoa (AA) will report earnings this Monday and unofficially kick off the earnings season. New earnings numbers will prove or disprove investment theses, and the market will see more fluctuations as investors punish losers and applaud winners. Sometimes the market moves drastically in face of any “surprises”, and it is highly recommended that investors have their portfolio protected from downside risks...
  
• The Growth Perspective of the First Trust ISE Cloud Computing Index Fund, SKYY: Last week the debut of the First Trust ISE Cloud Computing Index Fund (SKYY) – the first of its kind – attracted a lot of buzz in the media. It also received many critiques from analysts and investors...

There were interesting discussions for the first one and I'd like to recapture some key points I've made:

Personally I think copper is a better macro indicator than crude oil. It is said that copper has a Ph.D. in economy. Recently copper was very strong on the chart, much stronger than crude oil. That should say something about macro economic trend, at least investors' / traders' collective expectations about it.

Secondly, in my opinion China is the engine of global economic growth, not U.S. I think copper and energy are hot because China is one of the biggest consumers of these two vital resources.

Thirdly, the recommendation was not based only on macro views. Otherwise I'd recommend XLB instead of XLE. A hot product does not automatically make its producers rich, let alone its investors. An important part of the story is how effectively the industry translate products into cash flow. According to our ETF ranking system, energy sector is the best among its peers as for now.

[T]his article was composed 36 hours ago. At that time the debt ceiling talk didn't fall apart and there wasn't yet another earth quake in Japan, as least I wasn't aware of. That's one sad thing about financial markets - nobody can foresee the future. What investors can do is to come up with good strategies to profit from the upside and, at the same time, to protect against the downside.

One thing I've learnt from my experiences is to underweight news and overweight numbers. Debt ceiling talk fell apart but they will resume the talk sometime later. Japan earth quake will have negative impact but investors will, quite legitimately, start to think about the "pent up" demand for reconstruction. That's the nature of human beings, and that's the driver of zigzags of the market. Actually there was an article about this: "Why I Don't Watch CNBC".

China's growth is driven by the demand from U.S., at least it was true in the past. China is the producer and U.S. is the consumer.

But there are subtle changes already.

U.S. is not the largest trading partner of China. Europe is the largest trading partner of China as for now.

China has a large population, it would be a much bigger consumer if their demand is unleashed. As an early sign, China's trading with other Asian countries, most of them are poorer south east Asian countries, is constantly increasing in past years, and in those trades, China is playing as the consumer and the other countries are playing as the producers.

Nonetheless the China - U.S. grand cycle is still working. But I think it's not to the benefit of either country to stick on to it.