Shesa's SEPTEMBER 2014 INVESTMENT BLOG

                        21 September 2014

SEPTEMBER 2014 Investment Blog

Shesa Nayak  

U.S. Stock Market Commentary

Hello and Welcome to my September investment blog. This month I do have a lot of updates so please read with patience.

The US Stock market made further new high last week. DOW Jones closed last Friday at 17,279.74, S&P 500 closed at 2,010.40 and NASDAQ closed at 4,593.43 points. DOW and S&P 500 hit new all time high before giving up some gain towards the close of the market.  The inflation readings remaining moderate and the labor market have modest pace of improvement. Based on Fed’s view, the stock markets have begun to adjust expectations for interest rate hikes starting in mid-2015.

Current US Stock Market Trend and Wall Street this week

The U.S. economy produces almost a quarter of the world's wealth. The big news this week was the Alibaba (BABA) IPO. The Chinese giant Internet Company raised a whopping $22 billion in the largest IPO in history last Friday at New York Stock Exchange. There were tremendous excitements for this IPO like Facebook. Though IPO price was set for $68, the stock opened at $92.70 and closed at $93.46. So hardly any individual investor could have made money. It was the game of money managers and big financial institutions. As people keep asking me should I buy BABA now? Probably I will not buy at the current price. I know they command almost 84% of China e-commerce market and have strong revenue and profit growth. However, I still feel it’s expensive at this point. Hence, I may consider if there is some correction. Meanwhile, Apple releases iPhone 6, iPhone 6+, Apple Pay and Apple watch. Please see my update under Portfolio Update section.

Where the Stock market trending?

The market keeps going higher and higher and keeps making new highs. Why is the market going up? I do visualize the following reasons:

·      An accommodative Fed that keeps interest rate down despite QE ending next month (Oct). They also said no plan to hike interest rate for a foreseeable future

·      Relentless stock buybacks by U.S. corporate world

·      Anticipation of marathon Alibaba IPO which took place last Friday

·      Anticipation of another good earnings announcement season starting in October

Irrespective of all the aforesaid facts, the questions keep coming in mind, is it time to buy before further push? Or do we need to unload everything before the next crash? That is a billion dollar question, and one that keeps coming. I feel that next few weeks could see some correction before the next earnings season which kicks-off around October 2^nd week. If the corporate earnings next quarter come better, we could see further rally to the end of the year. If corporate earnings fail to meet the expectation then market correction may not be avoided. So what do we do? As I wrote on my earlier blog, I will have some cash available to take advantage of any such correction. If it does not happen, that’s OK because my other part of the portfolio remains invested.

Now let us go to this month’s ETF pick.

Direxion Daily Gold Miners Bull 3X Shrs (NUGT)

If you recall my blog on July 20, I wrote about DUST that’s the opposite of NUGT. At that time DUST was trading at $15.33. Now it is trading at 23.99. So it went up 56% in last 2 months. What more can we expect!! But today, I am going to take the opposite direction. As you know, I kept NUGT in my watch list for past couple of months and said I will write about this when right time comes. I guess the time has come. NUGT is an ETF – Exchange Traded Fund that fluctuate almost 3 times up/down depending on the gold price movement. If gold price goes up NUGT goes 3x, similarly when gold price comes down so also NUGT. A few weeks ago NUGT was trading at around $50. Now it’s trading at $27.51, almost 45% down. Why is it down so much? It’s mostly due to low inflation, strong dollar and fed statement. I have already started taking some position and I may accumulate if it goes further down. It’s better to buy NUGT rather than any individual gold or silver stock. Because it’s an ETF and there is no fear that it would go bankrupt unlike an individual company. This is simply a triple-leveraged play on Market Vectors Gold Miners ETF (GDX), whose top 10 holdings are Goldcorp Inc. (GG), Barrick Gold Corp (ABX) Newmont Mining (NEM), and Silver Wheaton (SLW) etc. Currently gold is trading at around $1215. It could go further down and how far lows no body knows. At present it’s almost trading around 4 years low. However, I believe that gold could bounce back in next few months but I may be wrong. As I mentioned in my July Blog gold has been mostly trading in the range of $1200-1400 for last couple of years. And this may be the opportunity to put some money.

Risk and strategy: NUGT is highly volatile and it could go up/down significantly on a day depending on the gold price. This is more of a trading than investing. If an investor is not comfortable of such fluctuations and unknown risk then better to avoid it. If the economy turns deflationary then it may come down further. Obviously, this may not be suitable for conservative investors. As we say, the future is always uncertain. However, if we consider risk and reward then taking some position at this point seems to be compelling to me. This can be primarily be used to trade. Of course, we can hold some portion of portfolio to hedge against inflation for long term. Let me make it very clear, I am not saying that gold prices will go up in next few days or weeks. But I would like to take advantage of possible gold price fluctuations and upside potential. Since it’s risky play we must analyze our investment strategy before taking any action otherwise better to avoid it. As usual, I will follow the same strategy that I usually follow for volatile/aggressive equity:

·       Not to invest more than 3-6% of the portfolio value

·       Always buy and sell in a phased manner, dollar cost average is very useful

·      Sell a portion of the equity and take profit when it goes up certain %age. It could vary from 10% to xxx%

·   Put a “Sell STOP” anywhere between 15%-25% in case the strategy goes wrong due to any unforeseen reason depending on your risk tolerance level

Equity Portfolio:

Equity	Suggested Price (USD)	Current Price (USD)	Suggested Date	% Changes	My Opinion (see disclaimer)
STOCK
AAPL	58	100.96	1/25/13	74%	BUY **
BIDU	86.43	224.93	4/18/13	160%	HOLD
GOGO	14	18.69	9/1/13	34%	HOLD
SLW	22	21.39	10/1/13	-3%	BUY
FB	47	77.91	11/13/13	66%	HOLD
TSLA	135	259.32	11/13/13	92%	HOLD
AGNC	20.02	22.46	12/14/13	12%	BUY
MA	78.7	77.28	12/12/13	-2%	BUY
NLY	10.77	11.31	2/2/14	5%	BUY
KO	38.55	42.05	3/9/14	9%	HOLD
KNDI	19.4	15.02	3/9/14	-22.6%	BUY below $16 **
AMZN	311.73	331.32	4/12/14	6%	HOLD
BAC	14.74	16.95	5/11/14	15%	BUY
QIHU	85	76.63	6/22/2014	-10%	HOLD **
BX	32.42	33.17	8/24/2014	2%	BUY
ETF
GDX	27	22.66	4/1/13	-16%	HOLD **
EDC	25	30.92	1/2/14	24%	SELL 27.05. See update below on 9/29.
DUST	15.33	23.99	7/20/14	56%	HOLD - take profit **
NUGT	27.38	27.38	9/21/14		HOLD. See my update on 10/7.
MUTUAL FUND
FBIOX	128	217.37	3/1/13	70%	HOLD
PRHSX	60	69.39	2/2/14	16%	HOLD
FSCHX	142.24	157.21	4/12/14	11%	HOLD
OBCHX	16.14	17.77	6/22/2014	10%	BUY
** Denotes to see update below Portfolio updates section
EXEL was sold with loss. You can see my alert posted on my blog earlier.

Portfolio Updates
Update on EDC: 9/29/14: I have been observing that EDC on a downtrend since last few weeks and continues to go down further. Hence I will be selling most of my positions. If anybody else has bought it then that’s my suggestion. But I leave it up to you. We booked profit earlier with more than 25% but now it’s time to get out with profit. It currently trades at around 27.05. We may again reconsider this again in future. 

Note: If willing, one can hold a little position.

Apple Inc (AAPL):

On September 9, Apple revealed a few exciting products. Let’s discuss those in brief and see what it means for Apple investor.

iPhone 6, 6+: The iPhone 6 will be of 4.7 inches and 6+ is having 5.5 inch went on sale last Friday and there is incredible early positive response. It does not only have bigger screen size but also better performance, better display, new iOS8 features and slimmer design. The demand for iPhone is much more than expected.

Apple Pay: The other big announcement was the Apple Pay system, which allows iPhone users to use their phones in place of credit cards at retail stores. Apple already has agreements with American Express, MasterCard and Visa. The usage will start from October. This could be a very lucrative business for all parties involved.

Apple Watch: After iPad this is the first new innovation by Apple in its product line under the leadership of Tim Cook. The Apple Watch features a customizable user interface and many facilities that integrate with iPhone features. Overall, it seems pretty good but let’s see how will be the market adoption once the product releases in early 2015.

With so many developments in the works, Apple is still a great stock to own for the long haul. Apple also has a massive $90 billion stock buyback program and pays a 2% dividend.

Direxion Daily Gold Miners Bear 3X ETF (DUST)

As said earlier, this ETF has gone up 56% since I mentioned in my blog on July 20. We had an incredible run! Now it’s time now to take some profit and put the fund to buy NUGT. However, I will still keep some portion of my portfolio in case gold price goes down further as a hedging strategy.

Qihoo 360 Technology Co (QIHU): The Company had a good revenue growth last quarter but did not meet the expectation of profit growth. It may still come down further and hence I have put it on HOLD.

Kandi Technologies (KNDI): On 4^th September the company issued additional 4.1 million shares to the institutional investors and raised $71 million at $17.21 per share. So the float has gone up. This company though risky has great potential in China for eclectic vehicle. So I can keep buying the share under $16 or so. This stock can also be used for trading to take advantage of fluctuation.

Market Vectors Gold Miners ETF (GDX): I am putting GDX on HOLD at this point as I am buying NUGT as GDX is also part of NUGT. But if it’s compelling then I can buy GDX as well.

Economy News to watch next week

Please go to the following URL:

http://www.marketwatch.com/Economy-Politics/Calendars/Economic

Source: Marketwatch.com

Folks, that’s all for today. Wish you good investing! Stay tuned for my next month’s blog. Thanks for your time. If you want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Please feel free to send me your comments and suggestions or alert request to shesa.nayak@gmail.com

Disclaimer: This blog is meant to provide my personal opinion rather than professional recommendation to buy/sell any stock, ETF, mutual fund or any other security(s). As an investor, it’s your hard earned money and you decide what is best for you. The above are merely my own suggestions and please contact a professional money manager to buy/sell any security. I do not earn any money by writing this blog. I have position on whatever security I write on the blog and avoid recommending any security that I do not follow.

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