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Friday, June 01, 2007

Outlook and portfolio

Outlook (more to come in subsequent posts)

1) Continued high economic growth from abroad.
2) Strong sectors of the U.S. economy (manufacturing, corporate profits, etc.), but a generally slowing economy, driven by a slow housing market and moderate consumption.
3) Increasing inflation, especially in commodities as supply issues emerge (higher oil - maybe even over $80; higher food prices; higher metals prices).
4) Increasing long-term interest rates, lead by U.S. rates.
5) Possible continued upside to stocks, but limited by increasing risks as the economy slows and interest rates move higher.
6) A dollar that is generally steady, supported by higher rates, but weighed down by weak fundamentals.


$11.80 UNAM (good value, great management, they should benefit from higher rates)
$13.47 NAHC (good value, they should benefit from higher rates)
$18.47 USS (tight Jones Act market, tight refining market)
$19.55 DAL (good valuation because of non-investment-bank-sponsored IPO)
$26.33 NWA (good valuation because of non-investment-bank-sponsored IPO)
$27.68 PFE (cash cow)
$56.94 AMGN (cash generator and free research department thrown in)
$27.50 HELE (great value and management)
$41.61 NEM (benefits from higher gold)
$77.67 DVN (supply issues with oil)
$15.41 ALDA (value, small position)
$5.80 JRC (value, small position)

$30.50 Short GM (already bankrupt if you look into their balance sheet
$108.02 SPG (way overvalued)
$54.51 C (suffers under higher rates)
$230.71 GS (suffers under higher rates)

I have some other stocks here and there, but that's the essence of the portfolio.

Some of my stocks (DAL, NWA, HELE, ALDA) would not do well in a recession. But I'm not trying to win under one and only one economic scenario. I'm trying to construct a portfolio that wins in ANY scenario, and trying to pick better values and better companies, with a slight bias to my macro outlook.


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