Wednesday, September 21, 2011

1) A general macro thinkpiece from IKN124, 2) a stock chart 3) an owl

1) Here's the piece that was featured in IKN124, published to subscribers last Sunday September 18th, that talked about the opportunity afforded by beaten down plays with Peru exposure:

Peru’s IGBVL ‘General’ index offers clues to value in Peru
This is a stock market index I watch closely and it’s been mentioned on these pages on plenty of previous occasions. The reason why it’s got my eye is that it combines strong mining presence (Peru being Peru, about 65% of the total index weighting is directly from mining companies) with the volatility of an Emerging Market with good growth, thanks to a country that, macro-economically speaking at least, is running its shop well. It also happens to list several companies that your author follows closely or even owns, but that’s a secondary reason really because all access to those stocks is just as easy via the Canadian, US or London markets.

So to the squiggly lines and the reason for featuring the IGBVL index today. We see that by comparing the Peru index to the S&P500 year-to-date there have been two major periods worthy of mention. The first started around April and finished around mid-July, when Peru’s first possible then confirmed election of Ollanta Humala as its new President spooked the markets and caused some strong volatility. Then the more recent period, from around mid-July to today, is far more interesting in the considered opinion of your author not least because it’s where we find ourselves today. Now we have an IGBVL that’s moving very much in lockstep with the wider world (represented by the S&P500 index) that, in turn, suggests that the market is more relaxed about the way things are in Peru politically.

That’s as it should be, because the fears that many had about Peru’s new mandatory (including those of your author before Humala’s impressive move to the centre post round one voting) have not been realized and it’s becoming clear that business is welcomed and encouraged, as it's a stable playing field for those wanting to invest.

So the expected process of “hey, Peru isn’t so bad after all” has begun, with the first stage that of a market index that has stopped falling and is acting like the rest of the world. This is good, but it also means that there are still Peru-exposed issues that were beaten down due to the ill-perceived political risk and haven’t yet recovered. Your author has his bought-in positions in some of these and this type of bigger-picture strategy note isn’t the place to start touting stocks. We’re all big girls and boys here, DYODD but at least recognize that the consolidation of the Peru macro picture may now be offering decent gains in stocks that haven’t played their catch-up yet.

2) Here's the five day chart of Bear Creek Mining (BCM.v)

3) Here's an owl:

DYODD, dude.

Disclosure: Long BCM.v, entry price $3.80. And the target on the trade is plenty above today's price so not selling yet, either. And while I'm here, I'd just like to thank that dumbass Lobito for the opportunities he offers the rest of us...keep em coming, dude!