Saturday, January 28, 2017

Searching for Value at Dow 20,000

With the Dow Jones Industrial Average at such a high of highs are there any investments left that are not overvalued?  Here are several ideas that I find interesting.

Emerging Markets $EEM

Emerging markets are still off of their historic highs by more than 30%.  There are various reasons for this lagging performance such as a strong dollar as well as a global glut of commodities.  As Trump takes office and Brexit begins to move forward we seem to be entering an era of anti-globalization.  On the surface these events do not bode well for emerging markets.  It takes a keen eye to see that finding a way to manufacture goods in these downtrodden countries without stepping on a political landmine could be extremely lucrative going forward.

Biotech $IBB

The Biotech sector is off of its highs by more than 30% as well largely due to political rhetoric from both Clinton and Trump.  It is natural for politicians to rail against the high costs of healthcare but the truth is that advanced healthcare has never been in higher demand.  In fact, this demand will only increase as more and more baby boomers reach retirement age.  An investment in Biotech, regardless of the political rhetoric, is as much of a no-brainer as it gets.

Energy $XLE

The Energy sector is still off of its all time highs by more than 25% mostly for the same reasons as those with Emerging Markets.  So we discovered this new technology called Fracking...why should that be a bad thing for energy companies?  The fact that the market forced this new technology into existence speaks more to the everlasting demand for more energy rather than to the end of it.  Plus the new focus of the Trump administration on manufacturing and infrastructure projects as well as his pick for secretary of state should only yield positive news for the Energy sector going forward.

Twitter $TWTR

Twitter is more than 75% off of its highs set after its IPO in 2013.  If you successfully invested in Facebook against all of the analysis that said that it would not be possible for Facebook to monetize mobile then you need to be invested in Twitter as well.  The arguments are essentially the same...how does Twitter monetize this new medium of communication that it has created?  It is becoming increasingly apparent that if Facebook is used to connect with friends then Twitter can be used to connect with enemies.  It is no wonder that companies are shy to advertise on this platform due to its contentious nature.  It will take more time for most companies to figure Twitter out, though some like Wendy's are already beginning to discover the power of satirical promotion to create messages that sound less filtered and more real.  This very feature is also what Trump has leveraged to propel himself into the White House and is currently using as a political game changer.