I have had a lot of trouble finding the time to do more formal posts lately. Thus, my blog will transition to more of a quick notes format. More formal articles will now be distributed to my Seeking Alpha page, and linked here.
1. Healthcare bubble. Healthcare stocks have been going up. All the traditional healthcare (Johnson and Johnson (JNJ)) along with newer biotechs (Pacira pharmaceuticals (PCRX)). Likely going up because Obamacare means more people that were uninsured will now be insured. Thus, theoretically, more care overall will be provided. Trend will likely reverse when electronic medical records are instituted. EMRs will enable rationing of care, thus decreasing healthcare consumption. This is a weak theory, needs refinement.
2. Internet of things bubble. I havent seen public excitement about this yet, but the underlying trend is there. My hypothesis is this is in stage 1 of George Soros’s boom bust model. Fundamentals look promising. The key four companies are Sierra wireless (SWIR), NMRX, ESYS, and Cisco (CSCO).
The PE ratios aren’t that high. 24 for SWIR, 20 for ESYS, 15 for CSCO. PE ratios typically get to 100 in a bubble. If the internet of things does become a bubble, there could be upside here.
3. Marijuana bubble. This looks promising. Many penny stocks. The only real company I’ve seen is GWPH. Pharmaceutical company making marijuana drugs. This company is up 1000% in the last year. It may be at the top of a bubble, or it may continue. It has been experiencing a little weakness in the past few months. Unsure if this is a test phase or a sign of a “double top”. Possibly watch this for signs that the bubble is about to burst, and then short.
4. Russia speculation. Russia’s stock market has been down because of the Ukrainian tensions. There is a fear that Europe will stop buying gas from Russia. However they have no alternatives. There is some LNG from Qatar, but not enough. It would be extremely inefficient to get LNG from Australia. US is not providing LNG until next year. Therefore, Europe will not stop buying Russian gas. Russian market is trading at a P/E ratio of 6. Some of that is because Russian accounting is very bad. But it is probably too low, and will recover in 12-18 months, if Russia does not annex any other countries.
5. China speculation. Chinese market has been depressed because authorities are trying to pop the real estate bubble there. There is a large banking system that is not accounted for on balance sheets (I.e. Companies issuing IOU letters of credit, etc) and there is fear that this informal system will collapse. This may happen. There is real risk. However, eventually markets will recover. China still has a long term expected growth rate of 6-7% or so, more than double the US growth rate. It is currently at a P/E of 10, while the US is at a P/E of 18-19. The perception of China may get better towards the end of the year, because China is predicted to overtake the United States as the largest economy in the world by 2015. The trick with this play is to find the bottom of the downturn, and to pick the stocks that will benefit most from a recovery from the dip.