Nicholas Southwick Levis
So after a long bout of thinking with regards to the runaway
move in gold and silver, I am looking for stocks to buy and stocks
to short. I believe small companies fare worse during stagflation,
which is what I believe we are facing today economically. So, I
would want to find some overvalued small caps to hedge my US dollar
undervalued small caps against... Western Digital (
) looks cheap against Salesforce (
), eBay (
) cheap vs. Amazon (
), etc.... Although it is based in sound logic, this strategy has
drawbacks as well as underperforming gold.
So are there any alternatives to buying gold that guard against the
same debt expansion/explosion risks that gold provides? I believe
there are several stocks worth owning in this case:
Freeport McMoRan (
): Trading at 11X earnings and 9X forward earnings, Freeport is not
a dollar risk to your portfolio and has a large margin of safety
from a reserves standpoint -- they have a huge store of gold and
silver in the ground that dwarfs the current market cap... giving
it an asset as well as cash flow valuation story.
B+H Ocean Carriers (
): A small Liberian shipper trading on the NYSE with a 25MM market
cap and 74MM in net tangible book value... The writeoffs may be
over as they posted a profit in the recent quarter... This was a
seemingly cheap name at $15 in years past so be careful here... but
upside is significant.
Noble Corp. (
): Noble trading at 6X earnings is compelling given they are a
Swiss based company drilling for oil... A hard asset play with a
large cash on cash return. Selling calls against the stock here is
): Cash flow here is a bit disconcerting but the discount to book
is attractive as is the industry group (agribusiness).
Seaboard Corp. (
): Pork, the other white meat.... Seaboard is the Berkshire
Hathaway (BRK.A) of pork as far as I can tell...
food prices rise enough for SEB to cover their input cost
increases, SEB can fly. Try waiting for the stock to come a bit
closer to BV per share.
iShares Silver Trust (
): I'm still bullish on this (check my calls on it all summer) but
it's hard to hold onto to something up this much...
Long [[SGG]] (iShares sugar ETN) and Pepsico (
) or Coca-Cola (
) in similar amounts: This is an interesting pair trade -- Sugar
futures are in backwardization meaning you are paid to own them,
and PEP depends on sugar prices staying low, plus they are
diversified with international business.
In the end, it appears that nothing beats gold for protection from
Uncle Sam's printing press, however, and [[GLD]] (SPDR Gold Trust
ETF) is vehicle of choice this year. I know, it's frustrating, so
buy some SGG and some KO, smile, and shut up about it.
I would advise being hedged here.
Long all investments mentioned, short CRM, IWM with puts, CMG,
All Eyes on Friday's Employment Report