Long term I think we're in a decade of inflation. After a 6-12 month downturn, commodities should continue their bull market. I'm holding my opex commodity producers (energy, palm oil) and want to load up on capex commodity producers in the downturn. I think the next bubble won't be the last (tech & crypto), it'll be commodities.
Short term I believe we are in for a market crash and a recession in the first half of this year. Don't know when. After I cover my shorts, I need to buy. Real money is made being long. This is my watchlist. Top of the list are dividend-paying blue chips that your grandfather would approve of, the bottom is the most speculative shit that can fly:
- Delfi (SGX): Largest Indonesian chocolate maker, net cash, paying out half its profits at just under a 4% yield. Can be re-rated as a growth stock if it can grow for a few years. Potential multibagger: 3 to 5X over 5-10 years. I can only buy a little, since I've already loaded up.
- Singapore banks: Dividend paying cyclicals, too expensive now, wait for a recession. No point doing a deep dive since they are all the same. OCBC is the most conservative, DBS has the highest beta (with historically the highest write offs in a recession). UOB has the least exposure to China. Probably 30-40% upside in a cycle if I play it right.
- Maybank (KLSE): Another conservative, high dividend payer. Low beta banking stock, ~6% (peakish) dividend at 80% payout ratio. Maybe 20% upside in a cycle.
- Boustead (SGX): A strange mix of businesses consisting of Asian ESRI software licensing, industrial real-estate and oilfield equipment providers. Financially conservative: Net cash, pays out half its profits as dividends. Could double in the next few years as oil E&P picks up, 5% yield at 50% payout ratio while you wait. Asian Centure Stock's paid report.
- S&P 500: For my retirement account. Won't do great with high energy prices and inflation, but there's some beta to be earned if I buy in a crash. Sell when the recession's over. Maybe 20-30% upside next cycle after a crash.
- Gold: goes up when real rates go down. I am holding GLD now, into a recession/crash as interest rate expectations start to fall. Want to hold Gold Miners (GDX or GDXJ) coming out of it, as interest rates fall and inflation expectations rise. Lets see.
- Aluminium: Norsk Hydro. One third of the aluminium price is from energy. European smelters have been closing down. Pays a giant dividend based on massive 2021 (peak) profits. But its a capex commodity, so wait for the downturn. Norsk Hydro is a low-cost producer, Alcoa is further out on the risk/reward curve.
- Rockwell Automation: As the US re-industrialises and wages stay high due to retiring boomers, we should see a secular increase in automation. This stock is too expensive now, needs to halve to ~160 for me to catch falling knife. Its cyclical - trades closely with the Nasdaq - so I might get a chance.
- Copper: Theres always been a story about an impending copper shortage for electrification/EVs. I prefer to treat it as a cyclical. Just buy COPX in a downturn.
- Largan Precision looks interesting. Small bet due to their industry risks (biggest customer is wary of them), but it is reasonably priced. 50-70% upside now, more if the market crashes like I expect. (Asian Century Stock's paid report).
- Tin: A cross between a capex and opex commodity, half of it is used for electronics. Again wait for the downturn. MLX:ASX and MSC:KLSE could go up 3-5 times from the next cycle's bottom.
- Lithium: Another capex metal. If EV demand explodes, it may be a decade long bull market, like iron ore from 2001 to 2010. Demand and supply are impossible to project, as they just exponential increasing curves. Still too expensive now, wait for a pullback.
- Bitcoin. The world's first decentralised digital currency. Trades like a risk-on commodity, so wait for the downturn. After which its probably got 2-3X upside in the next cycle.
- MercadoLibre: South American Amazon, with a growth runway, may benefit from Sea Limited's decline. Although its a real business, its a growth stock, so don't bother to value or model it. Latam benefits from high commodity prices, and Mexico from NAFTA. Its really just a high beta play - buy after a downturn, hopefully sell one or two years later when everyone's happy. Make it a small bet so I don't get shaken out by high volatility. 3 or 4X upside in the next cycle.
- ChainLink: A cryptocurrency, I see it as a venture capital fund or company trying to establish a monopoly on all off-chain operations for defi....remember defi? If defi takes off, its like buying Microsoft in 1995 or Amazon in 2001. Just a small bet: theres plenty of ways this goes to zero. 20X upside.
Every paragraph above - except gold - says "buy in a downturn".
Its all the same trade.
