Confession time.\u00a0 I am a cereal guy.\u00a0 If it wasn\u2019t for my wife Sheila, Shreddies would be the main staple in my diet.\u00a0 Oh, and also a cold beer every now and then.\u00a0 I also confess that I do not do the grocery shopping in my household, and if I am ever tasked with picking something up at the grocery store I NEVER look at the prices.\u00a0 For today\u2019s blog I googled the price of Shreddies and here is what I came up with.\u00a0 The cost for a 550g box is as follows:<\/p>\n
Walmart\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $3.97<\/p>\n
IGA\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $4.29<\/p>\n
No Frills\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $4.47<\/p>\n
Safeway\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 couldn\u2019t find it on the internet<\/p>\n
So, I now know the cost of a box.\u00a0 Imagine if this week prices dropped to their lowest level in over 20 years?\u00a0 I am guessing here but $1.00 per box seems to be in the realm of reality. \u00a0I would be stupid not pick up a few cases, wouldn\u2019t I? \u00a0Of course, I would need to notice the price reduction or the opportunity would slide by unnoticed by yours truly.\u00a0 I\u2019m sure you would agree that taking advantage of a cost reduction of 75% for something with a long shelf life is the smart thing to do.\u00a0 Many of you may now be rolling your eyes saying who cares just get on with it Cereal Guy.<\/p>\n
However, I contend that we should all care!\u00a0 Every once in a while a true \u201cShreddie\u201d opportunity comes along.\u00a0 To take advantage we must understand that the opportunity is there and act accordingly.\u00a0 But, to do that you need to know the price of a box.<\/p>\n
As investors we tend to treat stocks differently than Shreddies.\u00a0 We like to buy cereal at lower prices and stocks at higher prices.\u00a0 We like to buy stocks in an uptrend (I get it, I\u2019m human) that hopefully continues.\u00a0 It intuitively feels good to buy something moving in the right direction.\u00a0 So, stocks tend to be what in economics is called a \u201cGiffen Good\u201d – the higher the price, the more we want it.\u00a0 Same thing goes for luxury vehicles and jewelry.\u00a0 But not for cereal.<\/p>\n
Due to the impact of the Giffen effect on investor actions (by that I mean that investors chase momentum and shun value), at certain points in the market cycle specific sectors tend to be thrown into the investment trash heap.\u00a0 And that, is the reason for my cereal lead in.\u00a0 Cheap investment Shreddies are out there creating a very significant investment opportunity (these do not come along too often \u2013 we are now acting on your behalf).\u00a0 Of course, an investor must notice and understand price to benefit.\u00a0 My trading platform charts back 20 years and clearly shows that this sector is trading at all-time lows.\u00a0 In fact, trading at lower lows than those experienced in the great financial crisis of 2008\/2009.<\/p>\n
The sector – Energy.\u00a0 Take a look at the iShares MSCI Global Energy Producers ETF (symbol FILL traded in the US).\u00a0 This unit owns a large cross-section of the Global Energy sector (Exxon, Chevron, BP PLC, Royal Dutch Shell).\u00a0 It is fair to say that as this unit trades, so does Global Energy.\u00a0 Currently the unit trades around $12.50 up from a low of $7.77 in the depths of the March market swoon.\u00a0 So, the unit is up roughly 60% from its lows, we missed the opportunity, there cannot possibly be anything more to be made, the horse is out of the barn.\u00a0 To the contrary, in my view there is still significant upside.\u00a0 As a matter of fact, the average annual return for this unit over the last 5 years is MINUS 9.53%!\u00a0 There is PLENTY of upside!<\/p>\n
The covid-19 crisis hammered energy consumption at the end of Q1.\u00a0 This was into a period of on-going energy over supply thanks partly to a surge in tight energy technologies in the US.\u00a0 When supply exceeds demand prices drop, and did they ever.\u00a0 Excess production and covid-19 drilled (pardon the pun) energy stocks to the mat.\u00a0 That same FILL unit started 2020 at over $19.00 and lost 60% of its value and is still down 35% from its recent high.\u00a0 In my 20 years plus in this industry I have learned a golden rule, that lower commodity prices set the stage for higher commodity prices.\u00a0 Put simply, covid-19 demand destruction in Q1 triggered significant commodity price weakness.\u00a0 These low prices have meant significant under investment by the industry and have set the stage for a multi-year impairment of future oil production.\u00a0 This lower future oil production will ultimately result in higher oil prices.\u00a0 Evidence of underinvestment can be seen in drilling rig deployment.\u00a0 Deployment is essentially non-existent, down 70% plus in the US and Canada over the last year.\u00a0 By late summer\/early fall we expect that demand will exceed supply.\u00a0 The market is starting to sniff this out as it front-runs the price move. The risk\/return ratio is heavily skewed in favor of energy investors over the next 12 months.\u00a0 Stay tuned.<\/p>\n
Pivot\u00a9 continues to signal higher market highs are in the cards.\u00a0 If that changes so will we.\u00a0 Until then we will keep searching out opportunities.\u00a0 Enjoy the ride.<\/p>\n","protected":false},"excerpt":{"rendered":"
Confession time.\u00a0 I am a cereal guy.\u00a0 If it wasn\u2019t for my wife Sheila, Shreddies would be the main staple in my diet.\u00a0 Oh, and also a cold beer every now and then.\u00a0 I also confess that I do not do the grocery shopping in my household, and if I am ever tasked with picking […]<\/p>\n","protected":false},"author":43,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[14],"tags":[],"class_list":["post-337","post","type-post","status-publish","format-standard","hentry","category-commentary"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/posts\/337","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/users\/43"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/comments?post=337"}],"version-history":[{"count":1,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/posts\/337\/revisions"}],"predecessor-version":[{"id":338,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/posts\/337\/revisions\/338"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/media?parent=337"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/categories?post=337"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/mpwealthadvisory\/wp-json\/wp\/v2\/tags?post=337"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}