INVESTING: Investing opportunities remain, but pick your spots

Keywords Economy / Utilities

Only about a month and a half is left in the year. It feels as though under-invested managers are pushing to make things happen so they can catch up to the market.

Today, we are going to get into where the strength should be the rest of the year, and some of it is coming from unsuspecting places. We’ll also look at what should be avoided. It won’t come as any surprise where the weakness lies.

The markets have been rallying since August, and most investors are seeing a lift in their accounts. But I bet it will shock you to learn that one of the best-performing areas in the world has been Mexico.

The Mexican stock market is up more than 50 percent since June! The Mexican economy is still based largely on oil revenue, but oil prices are down in the same time frame. The stocks will remain some of the most volatile in the world for a while, but it is an impressive move that might continue.

How about old-world Europe bringing some life to the party? Germany, France, Italy and England are up more than 20 percent since July. Here’s another surprise: Spain has been the belle of the ball. The country is up more than 30 percent in the last few months.

I get the feeling, though, that there could be a spate of profit-taking in Spain, and it might get out of hand. The large-cap markets in England and Germany, however, look as though they can continue to attract investors for the next couple of months.

Despite all the hype surrounding Asia this decade, China has been a source of frustration for many investors. For every stock that turns in a decent performance, another gets killed.

A theme I have been bringing up again and again the last few months is a leadership transfer from small-cap stocks to bigger companies. Small stocks outperformed big stocks from 1999 until this past May. Since then, large-cap stocks have been doing better.

This is showing up in China as well. Two widely traded exchange-traded funds track a variety of Chinese stocks. FXI holds big companies like energy and utilities. CHN is populated with smaller, more speculative companies. Since the market bottom in the summer, FXI has outperformed CHN by 11 percent. And it’s the smaller stocks that haven’t done as well that have really attracted foreign investors’ attention.

I said I would bring up the stuff to stay away from, and here it is. Home builders. I know I mentioned taking a look at this group last month, and since then the ETF XHB has gone from $32 to $33.25. That 4-percent move is perhaps all you are going to get for a while. I don’t hold the same view as many that this sector is going to implode (maybe we can get into my reasons some other time), but at the least, money can be working a lot more effectively in other areas.



Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed here are the writer’s. Hauke can be reached at 829-5029 or at keenan@samexcapital.com.

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