Thursday, September 22, 2011

Buy Potash, Sell Gold (GLD; POT; MOS; NEM.tsx)

This was published two days ago and the manager quoted was at least 4% early but he raises some interesting, for a Canadian, points.
From the Financial Post:
Manager: Steven Palmer, AlphaNorth Asset Management
Fund: AlphaNorth Growth Fund
Description: Diversified exposure to Canadian companies typically in the $100-million to $1-billion market cap range
Launch date: July 25, 2011
Firm’s AUM: +$150-million

While investors continue the multi-year trend of piling into anything that provides a yield, stocks present a more compelling option than bonds, according to Steven Palmer, president and chief investment officer at AlphaNorth Asset Management.

While falling yields recently caused the U.S. 10-year bond to dip below 2%, Palmer finds it hard to see why that is an attractive one-year return. After all, some small-cap stocks can provide 2% returns in just a couple of hours.

At the same time, the yield on the TSX 60 index has made a relatively rare ascent above Government of Canada 10-year bonds.

“On a relative basis, equities are very attractive,” Palmer says. “People have been quite panicked. In August, markets got a little scary and everybody thought we were going into another credit crisis situation.”
The manager doesn’t believe that is the case, noting that the market is no longer acting like it does either.
“The charts tell me that we made a bottom and the market is trading quite well in my opinion — setting higher lows and retesting the downside a couple of times,” he says. “I don’t think the market wants to go down anymore, so I’m quite optimistic for the balance of the year.”...
...Materials account for 51% of the portfolio, with potash and rare earths representing the largest weightings in the sector.
Palmer believes the macro picture is pretty strong for potash. “People need to eat — that’s critical,” he adds. “They don’t need to wear gold chains and hoard gold in their basement.”
Palmer is avoiding gold stocks when possible, but he does own some in the portfolio.

While the Partners fund targets more speculative rare earth explorers, the Growth fund looks for exposure to the sector though names like Neo Material Technologies Inc., which processes rare earths....MORE