Given my belief that the outlook in my Sagflation theme has now shifted more inflationary, I have established positions that benefit from a steepening yield curve, commodity price increases, and manufacturers that either benefit from higher commodity prices or are able to pass along rising commodity prices.
From a volatility standpoint, I have favored quality larger cap names with a higher beta to benefit from a rising equity market. I believe these names have fallen out of favor over the past few months due to the volatility in the market and uncertain outlook. I have also favored stocks near their 52-week lows with a forward PE in the low teens or single digits to provide some cushion on the downside. Finally, I have favored stocks with bullish analyst opinions to help filter out companies with poor management and unattractive prospects.
Focusing on the next six months, I have established the following positions:
| Weight |
Name |
Ticker |
| ~20% | Proshares Ultrashort 20+ Yr Treasury | TBT |
| ~2% | ETFS Physical Palladium Shares | PALL |
| ~10% | SPDR Gold Trust | GLD |
| ~3% | iShares Silver Trust | SLV |
| ~4% | Eaton Corp. | ETN |
| ~4% | Rowan | RDC |
| ~4% | DOW Chemical | DOW |
| ~4% | Huntsman | HUN |
| ~2% | Goldman Sachs | GS |
| ~2% | Morgan Stanley | MS |
| ~4% | Prudential Financial | PRU |
| ~4% | Brookfield Asset Mgmt | BAM |
| ~4% | General Electric | GE |
| ~4% | Vale SA | VALE |
Rowan Companies, Inc. (Ticker: RDC)
| Price Purchased | $34.14 | Mkt Cap | $4.4 Billion |
| 52-Wk Low | $28.13 | Beta | 1.65 |
| CY+1 PE | 8.8x | Rating (# of) | Overweight (33) |
Rowan Companies, Inc. is a provider of international and
domestic contract drilling services. Rowan also owns and operates a
manufacturing division that produces equipment for the drilling, mining
and timber industries. The Company operates in three segments: Drilling
Services, Drilling Products and Systems, and Mining, Forestry and Steel
Products.
Eaton Corporation (Ticker: ETN)
| Price Purchased | $41.67 | Mkt Cap | $14.2 Billion |
| 52-Wk Low | $33.09 | Beta | 1.44 |
| CY+1 PE | 9.6x | Rating (# of) | Overweight (22) |
Eaton Corporation is a diversified power management company. It
is engaged in the manufacturing of electrical components and systems for
power quality, distribution and control; hydraulics components, systems
and services for industrial and mobile equipment; aerospace fuel,
hydraulics and pneumatic systems for commercial and military use, and
truck and automotive drivetrain and powertrain systems for performance,
fuel economy and safety.
The Dow Chemical Company (Ticker: DOW)
| Price Purchased | $27.50 | Mkt Cap | $32.6 Billion |
| 52-Wk Low | $20.61 | Beta | 2.32 |
| CY+1 PE | 8.9x | Rating (# of) | Overweight (19) |
The Dow Chemical Company is a diversified manufacturer and
supplier of products used primarily as raw materials in the manufacture
of customer products and services worldwide. It operates in eight
segments. Dow provides services to a range of industries, including
appliance, automotive, agricultural, building and construction, chemical
processing, electronics, furniture, house wares, oil and gas,
packaging, paints, coatings and adhesives, personal care pharmaceutical
processed foods pulp and paper textile.
Huntsman Corporation (Ticker: HUN)
| Price Purchased | $10.64 | Mkt Cap | $2.6 Billion |
| 52-Wk Low | $8.13 | Beta | 2.23 |
| CY+1 PE | 5.4x | Rating (# of) | Overweight (9) |
Huntsman Corporation is a manufacturer of differentiated organic chemical products and of inorganic chemical products. The Company’s products consists of a range of chemicals and formulations,
which it markets globally to a group of consumer and industrial
customers. It operates through five segments: Polyurethanes, Performance
Products, Advanced Materials, Textile Effects and Pigments.
The Goldman Sachs Group, Inc. (Ticker: GS)
| Price Purchased | $102.81 | Mkt Cap | $52.3 Billion |
| 52-Wk Low | $84.27 | Beta | 1.40 |
| CY+1 PE | 7.6x | Rating (# of) | Overweight (29) |
The Goldman Sachs Group, Inc. is a bank holding and a
financial holding company. Goldman Sachs is a global investment banking,
securities and investment management company providing a range of
financial services to a client base that includes corporations,
financial institutions, governments and high-net-worth individuals.
Morgan Stanley (Ticker: MS)
| Price Purchased | $17.18 | Mkt Cap | $33.0 Billion |
| 52-Wk Low | $11.58 | Beta | 1.42 |
| CY+1 PE | 8.5x | Rating (# of) | Overweight (28) |
Morgan Stanley is a global financial services firm that, through its
subsidiaries and affiliates, provides its products and services to a
group of clients and customers, including corporations, governments,
financial institutions and individuals. The Company is a financial
holding company. The Company is a global financial services firm. The
Company operates in three segments: Institutional Securities, Global
Wealth Management Group and Asset Management.
Prudential Financial, Inc. (Ticker: PRU)
| Price Purchased | $53.66 | Mkt Cap | $29.0 Billion |
| 52-Wk Low | $42.45 | Beta | 2.38 |
| CY+1 PE | 7.1x | Rating (# of) | Overweight (23) |
Prudential Financial, Inc. is a financial services company. It has
operations in the United States, Asia, Europe and Latin America. Through
its subsidiaries, it offers an array of financial products and
services, including life insurance, annuities, retirement-related
services, mutual funds, investment management and real estate services.
It offers these products and services to individual and institutional
customers through third-party distribution networks.
Brookfield Asset Management Inc. (Ticker: BAM)
| Price Purchased | $28.39 | Mkt Cap | $17.8 Billion |
| 52-Wk Low | $24.42 | Beta | 1.54 |
| CY+1 PE | 24.9x | Rating (# of) | Buy (10) |
Brookfield Asset Management Inc. is a global asset management company
focused on property, power and infrastructure assets. The Company
operates and manages assets in the areas, such as Renewable Power
Generation, which include power generating operations, along with a
small number of co-generation and wind energy facilities; Commercial
Properties, in which the Company owns and operates commercial office and
retail properties on behalf of selves and its co-investors;
Infrastructure, in which the Company’s infrastructure activities are
concentrated in the utilities, transport and energy and timber sectors;
Development activities include residential operations, properties held
for development and opportunity investment funds; Private Equity and
Finance business includes restructuring, real estate financing and
bridge lending in the property, power and infrastructure areas.
General Electric Company (Ticker: GE)
| Price Purchased | $16.47 | Mkt Cap | $176.3 Billion |
| 52-Wk Low | $14.02 | Beta | 1.61 |
| CY+1 PE | 10.5x | Rating (# of) | Overweight (18) |
General Electric Company is a diversified technology and financial
services corporation. The products and services of the Company range
from aircraft engines, power generation, water processing, and household
appliances to medical imaging, business and consumer financing and
industrial products. It serves customers in more than 100 countries.
Effective January 28, 2011, it held a 49% interest in a media entity
that includes the NBC Universal businesses. Its segments include Energy
Infrastructure, Technology Infrastructure, NBC Universal, GE Capital and
Home & Business Solutions.
Vale SA (Ticker: VALE)
| Price Purchased | $23.44 | Mkt Cap | $123.5 Billion |
| 52-Wk Low | $21.14 | Beta | 1.64 |
| CY+1 PE | 4.5x | Rating (# of) | Overweight (25) |
Vale SA is a Brazil-based metals and mining company. The
Company's product portfolio includes nickel, iron ore and iron ore
pellets, manganese ore, ferroalloys, aluminum, fertilizers, copper and
coal among others. Vale is engaged in the mineral exploration in 24
countries around the globe. In addition, the Company operates logistics
systems in Brazil, including railroads, maritime terminals and ports,
which are integrated with its mining operations and it has a maritime
freight portfolio to transport iron ore.
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