Long-term investing an investment strategy where a position is taken in a stock, a market, a currency or a commodity and is not sold for at least a few years. Long-term investing is creating an investment thesis on taking a position and why this position will pay off in the long run. The danger with long-term investing is staying with a position that continues to lose money. The most important aspect of long-term investing is to evaluate the investment thesis constantly. Things change. If the change alters the investment thesis, then an investor needs to sell and move on. If the thesis still works, then the difficult part is staying with a losing position until the market turns and proves the thesis right.
When it comes to long-term investing, it’s important to have a solid investment strategy that looks past the short-term fluctuations and focuses on the horizon. While many have been quite negative on the U.S. economy—and for good reason over the short term—this means many people have missed a good investment strategy involving the accumulation of the domestic carmakers before the latest move upward in their stock prices.
The recent results from the two American car-making giants show that the domestic market is actually quite strong. Ford Motor Company (NYSE/F) announced quarterly earnings that beat analyst estimates. The stock not only rose 8.2% that day, but it has continued to move upward. With 19 analysts estimating $0.30-per-share earnings, Ford came in at $0.40 per share, excluding one-time items. (Source: “Ford Advances After Outpacing Profit Estimates,” Bloomberg, October 31, 2012.)
The investment strategy for Ford has been to move away from the European division and move into markets in which the company is quite strong. The company expects to lose $1.5 billion in Europe this year and next. The long-term investing strategy for the company is to continue eliminating jobs in Europe and reducing that division, as weakness is expected on that continent for an extended period of time. This is certainly a prudent investment strategy for the company, as the American, South American, and Asian markets are far more attractive than Europe over the next decade.
Chart courtesy of www.StockCharts.com
As is quite evident from the chart, those interested in Ford for long-term investing had plenty of opportunity to enter the stock before its recent breakout. Even following the breakout, the … Read More
There has been a lot written over the past couple of years regarding the lack of investor sentiment with the decline in participation from retail investors. We’ve heard over and over about how the investor sentiment has generally been negative by the retail customer. This is best seen by the average volume drop, especially this year. There are several reasons that are certainly justified for this poor investor sentiment, but the average retail client should focus on long-term investing and not on competing with large institutions over short-term trading.
One recent development that will hurt investor sentiment once again, as the big guys are receiving preferential treatment, is that the parent of the New York Stock Exchange (NYSE), NYSE Euronext (NYSE/NYX), has just paid $5.0 million to settle allegations by the Securities and Exchange Commission (SEC) that the NYSE Euronext delivered trading data to preferential customers who paid for it.
The NYSE Euronext had essentially two streams of trading data; the regular data stream that the average retail long-term investing customer sees and the paid-for data stream that was delivered faster, primarily to high-frequency traders (HFTs). This is yet another blow to investor sentiment against the exchanges, who are trying to bring back the retail client. As we’ve seen for months with the Occupy Wall Street movement, people aren’t thinking about long-term investing; people are thinking about the fact that they are losing out to the large institutions, upsetting independent investors. And it appears that the playing field has indeed been unfair over the short term.
The problem has always been with the exchanges and how to balance new technological … Read More
When it comes to investment strategy, many U.S.-based firms simply take the approach of blaming cheap foreign labor everywhere else and throwing up their hands as if there’s nothing they can do. That’s not much of a long-term investing strategy. There are some examples of U.S.-based firms that are generating strong corporate profits with a unique investment strategy—providing innovative products that customers really want.
Cummins Inc. (NYSE/CMI) is one such American firm that has seen rising corporate profits and has an intelligent investment strategy. Cummins produces engines for trucks and machines. Some might think: how can a U.S.-based firm increase corporate profits by building an engine when foreign competitors must be able to do it cheaper? The answer is: good old-fashioned innovative designs developed with an investment strategy to provide customers with a superior product. Demand for engines built by Cummins continues to grow around the world.
Cummins’ investment strategy is to become the leader in producing innovative, high-quality goods. This vision is not short-term thinking, but rather an investment strategy built carefully over time that is now paying off in strong corporate profits.
Thirty-five percent of sales for Cummins came from emerging markets like India, China, Brazil and other smaller nations. In 2007, this number was 27%. While corporate profits have been strong, the latest quarterly results are showing some weakness in these emerging markets, as revenue declined 16% in China and 18% in Brazil. While these declines will hurt short-term corporate profits, the firm has a long-term investment strategy with a long-term vision over the next decade.
In the short term, cautious comments by the CEO, N. Thomas … Read More
Uranium investing has been severely hurt by all the bad news regarding nuclear power plants following the Fukushima Daiichi disaster in Japan last year. Immediately following this horrific accident, many investors got out of uranium investing and went to the sidelines until the future of the industry was clearer. Recent events are now allowing the clouds to part for uranium investing and perhaps the tide may be turning for those interested in long-term investing.
Nuclear energy and uranium investing are here to stay. Demand for electricity, especially for the manufacturing sector, is going to continue for decades, which is what you want to see when committed to long-term investing. The International Energy Agency forecasts global electricity demand to grow 2.4% a year for the next two decades, but emerging markets are growing much faster than that. India’s electricity consumption will grow 5.4% per year, while China’s will grow four percent per year for the next couple of decades. In total, the International Energy Agency estimates that global electricity demand will grow over 80% by 2035. When looking at long-term investing, I want to see consistent demand for decades to come.
Part of this push to electricity generation will come from natural gas, especially in North America where gas prices are cheap. I recently wrote an article detailing how an investor can profit with long-term investing in this sector (How to Profit from Low Natural Gas Prices). But, internationally, natural gas is not cheap everywhere. This leads us back to uranium investing to profit from the growth in nuclear energy with long-term investing over the next few decades.
Before … Read More
With the continued strength of oil prices, many investors are looking at a long-term investing strategy of putting their money in oil stocks. There could be some issues with specific country risk for oil stocks that many investors might not have thought about before when considering their long-term investing strategy. While we all are aware of Venezuela and the Chavez regime being not very friendly at all to international corporations, the recent news of Chevron Corporation (NYSE/CVX) executives being denied the ability to leave and facing prosecution for criminal charges in Brazil is definitely a new twist for oil stocks and their investors.
Let’s start with where oil prices are headed. The pullback in some of the other commodities has led some people to believe that oil prices are setting up for a sell-off. While there are some fundamental characteristics that might lead some to believe that to be the case, with geopolitical risk in the markets high and demand increasing, it looks highly likely that oil prices will stay elevated for some time. If this were to be the case, it should be good news for oil stocks and those interested in long-term investing, as the high oil prices will maintain earnings growth and fund new exploratory work to develop new oil fields.
Of course, I’m not the only one who believes this, as the technical situation with oil prices is telling us that the big money funds are positioning themselves for a spike upwards. Of course, no one can predict the future for oil stocks, but if oil prices break above current resistance levels, then look for a … Read More
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