Hedge Fund titan Jon Paulson pulled off the greatest trade of all time in 2007, raking in a cool $15 billion in his bet against subprime mortgages - according to the International Business Times who ranked the top ten greatest trades of all-time. Some were brilliant masterminds, others were just plain lucky.
The Top Ten Greatest Trades of All-Time
1. John Paulson’s bet against sub prime mortgages made him $15 billion in 2007
2. Jesse Livermore’s call on the Crash of 1929 (a legendary trader featured in the popular book, Reminiscences of a Stock Operator).
3. John Templeton’s foray into Japan in the 1960s (a true investment pioneer, Templeton foresaw the rise of Japan after World War II and profited hugely from it).
4. George Soros’ breaking of the Bank of England in 1992 (Soros made $1 billion).
5. Paul Tudor Jones’ shorting of Black Monday in October 1987 (he predicted the crash, bet a bundle & tripled his money as the market crashed 22% in one day).
6. Andrew Hall’s $100 oil prediction (with oil trading at $30 per barrel in 2003, Hall bet prices would rise to $100 in 5 years; they did and he took home a personal paycheck of $100 million in 2008).
7. David Tepper’s 2009 bet on financials (as the market hit its low in early 2009, Tepper bought financial services stocks & his fund earned $7 billion that year ($4 billion of that went to Tepper).
8. Jim Chanos’ prescient shorts (his sharp analysis led him to predict the demise of Enron, WorldCom, and other firms, and he is known as the best short-seller in the world).
9. Jim Rogers’ early call on commodities (he was bullish on commodities back in the 1990s & has been riding them to great profits ever since).
10. Louis Bacon’s geopolitical play (he correctly predicted that Saddam Hussein would invade Kuwait in 1990 & profited handsomely by going long on oil & shorting stocks, which helped his fund return 86% that year).
Most of these trades were ‘global macro’ plays where huge, concentrated bets were made by analyzing fundamental economic/business conditions. These investors excelled at turning a great observation about the world into a great investing idea. But, while these make the headlines, you never hear about the other investors who made a big call and missed, and ended up out of business.
It’s almost impossible for regular investor folks to make a ‘big score’ like these traders. Rather than trying to throw a touchdown pass on every play and make a big score like these traders, the smarter game plan is to focus on trying to get consistent first downs. Do your homework, watch market/sector developments, don’t chase stocks up or down. Do that, and the score may take care of itself.
Source: International Business Times
Shares of the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) has soared throughout 2013 and has even hit its 52-week highs trading at $77.38. Turkey as a whole has been experiencing robust growth as the Borsa Istanbul National 100 has surged to its highest levels in the past 25 years. We have been huge supporters of TUR dating back to August 8th, 2011 when we issued our first ‘BUY’ rating for the ETF in our article ‘iShares Turkey ETF (TUR) Poised for Success‘. Since then, TUR has appreciated +69.67% over the past 22 months.
What Attracts Investors to TUR
Investors looking to play the Turkish markets have few options. iShares MSCI Turkey Investable Market ETF (TUR) originally launched in 2008 is the only option avaliable to investors seeking a pure play exposure in the Turkish equity space. TUR is also the only ETF with dedicated Turkish exposure. The banking sector also plays a prominent role in the investable market in Turkey and TUR has a high concentration of financials in its portfolio.
What To Expect Going Forward
When it comes to Turkey, it has been the talk of a higher sovereign debt rating that has been lifting TUR, the lone ETF devoted exclusively to the country. Turkey, which has been engaged in a multi-decade conflict with Kurdish militants in the Southeast part of the country, is working to end the conflict. The government there is in negotiations with Abdullah Ocalan, the jailed leader of the Kurdistan Workers’ Party or PKK, in a bid to end the bloodshed.
Just last month, Moody’s Investors reported that Turkey’s ongoing efforts to bring an end to the conflict could be a positive credit step. Fitch Ratings upgraded Turkey’s long-term foreign currency Issuer Default Rating (IDR) to BBB- from BB+ back in November and the Long-term local currency IDR to BBB from BB, this is huge news as it’s giving Turkey its first investment grade ratings in nearly two DECADES.
This has been great news for investors as the speculation of a possible credit rating upgrade has lifted Turkish banks shares. TUR is heavily centered on the Turkish financial sector with 51.9% of its holdings in financial services stocks, quadruple its next largest sector weight, industrials.
Turkey’s economy has some good signs heading their way. Beyond this falling inflation rate, investors should note that Turkey has seen a plunging growth rate as well.
Turkey has good medium-term growth prospects and a diverse economy. The nation’s debt-to-GDP ratio stands at 39.9%, much lower than the debt-to-GDP ratio of many developed economies. On top of this, the country has a low employment rate, government reforms, strong, solid banking system, and improved credit rating. Adding all these solid growth factors together and Turkey could prove to be a great investment market in Europe for years to come.
If you have any further questions on either TUR, Turkey’s economy or any investment at all don’t hesitatet to contact us at all by emailing us at jameshartje@StocksonWallStreet.com or Follow our Contact Form
Also make sure to tune in later this week for our long-term outlook on TUR along with more detailed analysis on both Turkey and other emerging markets.
The Long Lost Oracle the Documentary Trader an Insight into the Life Investment Strategy of Paul Tudor Jones
Take a good hour, relax, & watch The Documentary Trader: An Insight into the Life & Investment Strategy of Paul Tudor Jones. It will be one of the most enlightenting & educating things you can learn from. Words cannot even describe how much it will help improve your investing repertoire. If you call yourself a trader or investor & don’t know who Paul Tudor Jones is then you have a serious problem. For the rest of you, here is a brief little bio to give some background on what both myself & Stocks on Wall Street consider to be one of the greatest fund managers/traders of all-time & a mentor we have long studied & used to implement our own trading strategies. Just in our article the other day, “The Top Ten Greatest Trades of All-Time” we mentioned Paul Tudor Jones as he came in #5 on the list for his infamous call of Black Monday on October 1987 when he predicted the crash, shorted the markets by betting a bundle & tripled his money as the market tanked 22%. That’s just one of the many great achievements this man has accomplished throughout his career, the bio below followed by his documentary will give you the true insight to his greatness.
Paul Tudor Jones II
Paul Tudor Jones II is the founder of Tudor Investment Corporation, a multi-billion dollar hedge fund. He is worth an estimated $6.3 billion in 2009 and was ranked by Forbes in March 2007 as the 369th richest person in the world. In 1976 he started working on the trading floorsas a clerk and then became a broker for E.F. Hutton. In 1980 he went strictly on his own for two and a half profitable years, before he “really got bored.” He then applied to the Harvard Business School, he was accepted, and packed to go when the idea occurred to him that: “this is crazy, because for what I’m doing here, they’re not going to teach me anything. To be a trader, this skill set is not something that they teach in business school.”
He consulted his cousin, William Dunavant Jr., for advice. Dunavant, whose Dunavant Enterprises is one of the world’s largest cotton merchants, sent Jones down to New Orleans to talk with commodity broker Eli Tullis, who hired and then mentored him in trading cotton futures at the New York Cotton Exchange. During his time working for Eli, Jones was quoted saying:
“He was the toughest son of a bitch I ever knew. He taught me that trading is very competitive and you have to be able to handle getting your butt kicked. No matter how you cut it, there are enormous emotional ups and downs involved.”
In 1980, Paul Tudor Jones founded Tudor Investment Corporation which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, which consists of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in the global equity, venture capital, debt, currency, and commodities markets. They manage around roughly $18 billion dollars in capital.
One of Jones’ earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions.
Jones uses a global macro strategy when trading in some of his funds. If you want to see this strategy it can be seen in the 1987 film “TRADER: The Documentary”. The film shows Mr. Jones as a young man predicting the 1987 crash using methods similar to market forecaster Robert Pretcher. This video is absolutely thrilling because of the amount of detail it gives into how he trades and manages risk.
The video used to sell for hundreds of dollars as competitors/enthusiast viewed it as the Holy Grail into Jones trading strategy. It has been banned from circulation; only original copies exist. It was original shown on public television in November 1987, however very few copies exist. Those that do are hoarded by traders who watch the hour-long movie in the hope of gleaning possible trading tips from Jones. According to Michael Glyn, the video’s director, Jones requested in the 1990s that the documentary be removed from circulation. Jones in fact, even went as far as purchasing what he thought were all the remanining copies of the docunemnaty but he was unfortuantely unaware of the power of the internet & how quick something can virally spread.
Still as it is there are very few websites that have the original version of ‘Trader’ so luckily for you, Stocks on Wall Street was able to get our hands on the original for you all to enjoy. How we found it, don’t ask but to re-emphasize the main point, EVERYONE NEEDS TO MUST WATCH THIS VIDEO ASAP. If you have any aspirations of becoming successful in the world of trading one day then you must watch this video. If you have work in the morning- you shouldn’t go until you’ve watched this; it’s your mom’s birthday tonight? – Not until you’ve watched this video; you’re tired and need sleep? – You don’t sleep until you’ve watched this. I hope we emphasized the importance and the value this video has. Don’t take for granted how much longer it will be live as Jones is still on his witchhunt to take it down across the web. So share with your collegaues, family, and friends heck even all your social media buddies as this is one of the greatest gifts you can send them. To watch the video simply follow the link below, enjoy!
The Cliff Stevenson Group is a leading real estate group that offers all the services one can expect from a top-tier real estate firm. From the start, one thing that really sets the Cliff Stevenson Group apart from its competition is their web presence and the amenities they offer online. Not only do they have a full service website with all the basic information but they also have many other great extra amenities that we rarely see other real estate agents implement. For example, all of the Cliff Stevenson Group’s current active listings are right there on the website so within one click of the mouse a potential buyer can see everything he has to offer including added details and information about each property. On top of that, you are able to access all of the Cliff Stevenson Group’s recent and past sales, which are great for prospective sellers who are shopping around real estate agents, as they are able to see the Cliff Stevenson Group’s track record and make the educated decision on whether or not it’s the right fit for them.
The thing that most impressed us about the Cliff Stevenson Group’s website is all the educational tools and resources they offer to their clients. By browsing through the website you are able to learn all the different aspects of buying and selling a home including added analysis on what effective strategies work and what doesn’t work. To most buyers this would be a huge resources as on average people don’t buy and sell their homes that often so it’s expected that they won’t know all the strategies to getting that great sale or making that great purchase. In addition to all the educational resources offered, the Cliff Stevenson Group also has a regular blog and a video blog to keep clients updated with their progress and to offer more additional resources and information. They also offer clients with market reports and detailed analysis on past and present sales plus what the real estate markets current trends are.
From going through the Cliff Stevenson Group’s website you can clearly see that not only are they a great real estate group offering all the top tier amenities and resources but that they also care and will go the extra mile to help you out. If you select the ‘Meet the Team’ page you are able to get acquainted with each and every member of the Cliff Stevenson Group. In addition, you can also read past testimonials from various clients and after reading them you will see that everyone leaves more than pleased with the Cliff Stevenson Group’s service. There is no question that the Cliff Stevenson Group is the premier real estate group in the Calgary area and if I were a home buyer or seller in that area I would hands down pick them to be my real estate broker and agent. Simply click on the link or go to http://www.cliffstevenson.com to get your own first hand experience at how great the Cliff Stevenson Group’s service is.
The senior citizens of today are slowly becoming more and more aggravated and increasingly discontented with their current life insurance plans. Part of this is because of the major changes that have taken place. In the past, people believed that life insurance was a necessity and as a result policies were accepted without argument. The reasons senior citizens are becoming more and more aggravated by the life insurance companies is due to the fact that the life insurance policies responsible for insuring individuals are not resourceful and offer little instruction to those interested in selling their policies. Furthermore, others have succumbed to simply receiving a small cash value for their policies, from the insurers themselves.
Due to all these problems, a third alternative has emerged, known as a life settlement. A life settlement is when a life insurance policy is sold to a party other than an insurance company, for more than its cash value, but less than the benefit that would be insured after death. For those who intend to liquidate their policies for financial gain, a life settlement can be an indispensable economic tool.
Currently the problem with life settlements is the fact that most of the population has no idea about what they are or how they work. As a result, many policyholders often resort to surrendering to a life insurance company just because they are not informed. Making such a move could cost you a significant amount of money, on average users can get 8 times the payout vs. surrendering to the life insurance company. That can add up to some serious money so make sure to read our full article as we are here to educate you on how the life settlement process works and how you can take action. We will also provide you with the right resources to take advantage of such an offer yourself.
What Are Life Settlements?
Life settlements function as a profitable source of security for senior citizens unable to afford their current policies. If a life insurance policy doesn’t meet the necessary requirements or if it fails to provide enough death benefits, the senior citizen is able to then sell his or her policy to a third party.
Once you have sold your life insurance policy, you are no longer required to pay for insurance premiums. Policy owners posses certain rights. Someone’s life insurances policy is basically their personal property therefore giving that owner the ability to manage or sell it if they wish. As far as sale value is concerned, there are no limitations to this process as a life insurance policy owner may sell their policy for whatever price they want. Life settlements work according to the policy owners’ rights. These liberties include changing the designation of the beneficiary, borrowing against the policy, selling the policy to another company or party, using the policy as collateral for a loan, and naming the beneficiary of the policy.
What Happens After You Sell
Once a sale is made, the seller may user the funds in any way they wish and they are not required to be above or below certain asset or income levels. During the sales process there are no upfront fees or hidden costs associated that might sneak up on a seller. After someone chooses to sell their policy, they then give all their death benefits to the new owner and in return receive a lump sum payment. The total amount of payment is based on the life expectancy of the seller.
How to Get Started
If you are now interested in taking advantage of the life settlement process or just want to learn a little more about how it works and speak to a professional broker then simply go to A Life Settlement’s website and click the ‘FREE! Get Started’ button. To be directed to the website simply click on the link below or go to http://www.alifesettlement.com/
If you haven’t booked your summer plans yet, brace yourself. There’s actually good news this year, for a change. Airfares to many popular U.S. destinations have dropped. This is according to the Wall Street Journal who earlier this week posted an insightful article detailing the best places to fly this summer. WSJ added an entertaining graphic as well which you can see below:
As for the airline industry, as many of you know Stocks on Wall Street has been very bullish the past two years. Most specifically when it comes to the five airline stocks we hold:
Allegiant Travel (NASDAQ: ALGT)
Boeing (NYSE: BA)
Delta Air Lines (NYSE: DAL)
Southwest Airlines (NYSE: LUV)
UAL Corp (NYSE: UAL)
For those of you who haven’t read any of our past articles on the airline industry, simply click on the links below:
Going forward, we think that the airline industry might have seen it’s best days. We will be going into more detail about our thoughts in our article next week so make sure to tune into SWS throughout the week to find out more!
Source: The Wall Street Journal
If you were able to flip a switch & go back a year ago today you know what you would have? A lot of big questions marks & some major unknowns about what to expect from Stocks on Wall Street most recent investment advice. On April 30th, 2012 to a lot of people’s surprise, Stocks on Wall Street published an article titled:
The title is rather self-explanatory but just to make sure it’s clear to everyone we recommended our readers to invest in three relatively unknown, highly speculative small to mid cap Chinese tech stocks.
When we originally made these picks it was an interesting time to be involved in the technology sector. Mark Zuckenburg has just taken Facebook public and thanks to the IPO heard around the world, many analysts and investors alike focused their full attention on Facebook’s IPO not recognizing that there was plenty of better investment opportunities out there, they just needed to be found. At the time, analysts were raving about America’s growing tech boom and all the different strong technology giants we had in the U.S. The thing was, many of these U.S. tech giants had done nothing to prove themselves and really it was the media blowing everything out of proportion most infamously the whole Facebook IPO and it’s 24/7 news coverage. When you looked at the facts, it was really China with the upper hand and the one in the driver seat. With a population of over 1.4 billion and a booming tech industry it was really China who had emerged as the true player in the tech world holding many of the top up and coming tech stocks. At the time our favorite Chinese tech stock was Tencent Holdings who is the equivalent of Facebook to China. All you need to do is put both Tencent Holdings (0700.HK) and Facebook’s (FB) charts next to each other to see which company was leading the way. At the time, we had already been current Tencent shareholders leading even more to our reasoning of finding a completely new investment route than we are use to.
Instead of choosing to invest in what many considered to be China’s three can’t miss, large-cap tech stocks. They are as follows, Baidu (NASDAQ: BIDU), China Mobile (NYSE: CHL), & Sina Corporation (NASDAQ: SINA). We on the other hand decided to take the road less traveled and in this case steep.
Collectively we decided we would target three small to mid-cap Chinese tech stocks. The highly speculative nature of the picks was something that intrigued us quite a bit. While these stocks were relatively unknown to the average investor they weren’t to us. Like when making all our investment decisions, we made sure we new the inside and outs of all three picks and while they had some relatively high risks to them we believe the potential gains made them worth the risk. As a result, we invested in the following three Chinese tech stocks and for those of you who have read our original article you would know that we did outline the speculative nature of these picks just so our readers new that they weren’t your typical, conservative investment opportunity. The three stocks we invested in were the following:
- RDA Microelectronics (NASDAQ: RDA)
- Spreadtrum Communications (NASDAQ: SPRD)
- Vimicro International (NASDAQ: VIMC)
Hands down we had made the right decision & no we were lucky we avoided investing in any of the Large Cap Chinese Stock Picks. Instead going the route of our three speculative Chinese tech plays ended up being the right call. You can overlook these things in every possible nature but overall our decision paid off big-time especially when you factor in how our three Large Cap counterparts performed during that same time period.
If we had gone with our large cap tech strategy we would have held positions in the following:
- Baidu (NASDAQ: BIDU)
- China Mobile (NYSE: CHL)
- Sina Corporation (NASDAQ: SINA)
Over the past year, all three stocks performed well below their expectations producing negative overall yields across the board.
- Baidu (NASDAQ: BIDU) -36%
- China Mobile (NYSE: CHL) -2%
- Sina Corporation (NASDAQ: SINA) -6%
How happy do you think our readers would have been if all we had to show them was a total net loss of -44%? Not happy one bit, we can tell you that.
Luckily, we chose the alternative route & as a result we believe our readers will be extremely pleased with our overall performance. Over the past year, all three stocks have taken virtually a different route than planned but the good part is RDA was the only pick that failed to produce any substantial gains. That’s right, RDA really struggled last year & heading into 2013 with the overall share price falling -28%. The good news is that SPRD decided to have an exceptional year grossing +57%, which will put us comfortably back in the lead. Finally, last but not least we have VIMC who performed steady & strong all year long grossing a total of +17%.
1. RDA Microelectronics (NASDAQ: RDA) -28%
2. Spreadtrum Communications (NASDAQ: SPRD) +57%
3. Vimicro International (NASDAQ: VIMC) +17%
As you can see, it was quite a different tale of the two story lines.
A large part of our success comes directly thanks to the exceptional year that SPRD had appreciating over +57%.
You can’t let VIMC’s performance & achievements go unrecognized, as +17% is still a great one-year yield.
As for RDA, there’s not much we can say other than it just wasn’t their year. If anything, they were lucky they got to team up with such a dynamic duo as RDA’s -28% would them only behind BIDU as the worst pick of the group.
Not quite done just yet, there is one last thing we’d still like to analyze. Lets see how our 12-month price targets matched up with each picks actual total net gains.
To start we have VIMC who we originally bought at $1.28 per share. While VIMC had a solid year appreciating +17%, it didn’t come close to our 12-month price target as we set the bar ridiculously high with a price of $2 per share. This would have resulted in a total yield of 56%. C’mon now they’re not SPRD lol!
As for SPRD, they were another pick where we set the bar ridiculously high. We bought our original shares at $13.80 so issuing them a 12-month price target of $21 per share is a tough feat as that’s a total yield of 52%. We sure hope you all remember just how great SPRD performed & the yield they brought in this year as even though we set the bar high, they still beat it by a cool +5%.
Last but not least we have RDA holding up the bottom at -28%. When we first invested in RDA it was trading at $12.87. Originally we had anticipated RDA would at least be trading in the positive territory throughout 2012 & 2013 so we set a modest 12-month price target of $14.50 resulting in a total yield of 12.66%. Sadly even with the modest expectations it just wasn’t RDA’s year at all, lets just hope they come back next year stronger than ever.
To some people the RDA pick will bother them as they have a tough time accepting defeat especially if that was your decision making that let to the defeat. But since all three picks were made collectively together it’s in our best interest to put RDA behind us & focus in on the all the good things that came of today. It’s all about looking at the big picture & seeing that there is nothing worth complaining about as in fact we should be quite satisfied with ourselves & equally impressed as producing a total net yield of +46% is a great achievement. It stands even more impressive when you factor in just how bad the Chinese large cap tech stocks performed. If there is one thing you can still easily see is that our economy is still struggling worldwide & that we are still a ways away from times of economic prosperity. These aren’t your fathers boom years where whatever you put your money into in the markets it just went up. You try that kind of strategy now a days & you’ll be quickly asking where’d your money go. It clearly takes a strategic investment mind & someone with in-depth knowledge about the markets & what they’re doing to produce consistent gains trade after trade.
A comparison we always like to make is to see how both the NASDAQ & Dow Jones Industrial Average have been performing during the same time period. Over the past year it was actually the NASDAQ who slightly edged out the Dow Jones appreciating +14% compared to +12.15%. That’s where I like to factor in our average yield per pick which was +15.33% & you can see that even with RDA’s struggles we were able to beat the markets & that we made the right overall decision in investing our money. Now the next question is where to next?
Everyone make sure to tune in later this week for more in-depth analysis on all three of our picks. Stocks on Wall Street will be reassessing our overall position on each of them, offering new analysis & guidance going forward, we will be again handing out our 12-month price targets along with offering our final overall decision on whether we are going to hold onto any of the three stock picks or whether we decide to take our gains & relocate somewhere else to find the next great investment opportunity.
Mark Cuban went onto CNBC to discuss the current state of the markets and Cuban responded by saying ’I rarely invest in stocks as there are no new names, new energy or new opportunities in stocks because of a lack of trust in the market.’ Does Cuban have a valid point with his call on the markets lack of new products, names, or opportunities?
Here are three of the biggest risks and threats to your financial future and your wealth today. Also read for advice on how you can exert more control over each one and enjoy more of what’s yours.
Risk #1: Currency Fluctuation. The U.S. dollar has taken a real beating this past year and is expected to stay down over the long term. Having all of your assets in U.S. dollars (or any single currency) is not sound financial planning. You don’t have a diversified portfolio if all your assets are in one currency. By going offshore and holding portions of your assets in other currencies, you are truly diversifying and protecting yourself from the ups and downs of one currency.
Investing in currencies on your own, without an ETF, can be difficult. Most retail investors are better off with currency ETFs (exchange-traded funds) which track a single foreign currency or basket of currencies by using foreign cash deposits or futures contracts. Currency ETF’s allow investors to speculate in the currency market without the risk of investing directly in currencies and without entering the forex market. Some of the most popular currency ETFs are offered by Wisdom Tree Dreyfus, Rydex, PowerShares, Market Vector and Barclays. But you need to do your homework before diving in.
Risk #2: Rising Taxes. Beginning Jan. 1, 2013, all American citizens will experience significant tax increases, many in the form of hidden taxes and fees. At the same time, U.S. citizens with foreign bank accounts may pay a withholding tax of 30% on transfers of funds to and from these accounts (a provision of the recently amended and little-known HIRE Act). So, if you run your own business, it makes great sense right now to think about moving your business to a more tax-friendly environment offshore. Or, you could stay in the U.S. and keep an account offshore where it is free of U.S. tax obligations.
The key point is that, whatever you’re going to do, you should do it as soon as possible and well in advance of 2013.
Risk #3: Litigation. The U.S. is a litigious society; a new litigation suit is filed every 17 seconds. This may or may not affect everybody. But, if you’re a doctor, for example, or someone with a high profile who’s more susceptible to being sued, then you understand the increased risk. In this case, the best solution is to protect your assets by moving them offshore. Your offshore assets will be outside the realm of U.S. judgment and, therefore, far more difficult for creditors to get at. This should not be confused with the fact that U.S. citizens and green card holders will continue to be taxed on their worldwide income, no matter where they reside or hold their assets. Income tax is unavoidable other than legitimate tax reduction strategies. However, you can minimize litigation risk to your assets by going offshore.
Back on July 2nd, Stocks on Wall Street released an article on Rex Energy (NASDAQ: REXX) recommending the stock as a ‘BUY’ and signaling to investors to purchase shares at the price of $11.62. Due to overall strong performance and increased optimism around both Rex Energy and the growing region they drill in we decided to upgrade our position and offer some new changes and updated guidance on Rex.
How Has Rex Energy Actually Performed?
Since our recommendation REXX has performed exceptionally well soaring over 39% in a 9-month period all the way to $16.11. At its peak, shares hit $17.33 a total yield of well over 50%. After further examining REXX’s financial statements we are still optimistic especially since overall numbers have improved, better positioning the company for the long-run. Below are some five reasons to continue to be bullish on Rex.
Five Reasons to Continue to Be Bullish on Rex Energy
- REXX’s PEG Ratio improved substantially rising from 0.96 back in July 2012 to currently 0.51. This is direct proof that management’s overall strategy and efficiency have been very effective positioning the company for a strong year going forward.
- The company has beat earnings estimates the last two quarters and as a result consensus earnings estimates for 2013 and 2014 have increased.
- Three initial test results from the Utica prove to be hugely successful and big wins for Rex indicating the liquid-rich area is even more prosperous than they originally projected.
- As a result of all the positive feedback, strong numbers, & overall consistent performance analysts across the board have raised their price target for REXX from $16 to well over $19 a share while continuing to maintain an ‘Outperform” rating on the stock. Overall 82% of the analysts watching the stock have issued a ‘BUY’ rating or higher.
- Like we have mentioned before REXX continues to be a logical acquisition candidate for a bigger player. Why? It’s due to the fact that REXX is a small cap company worth a little over $1B however their robust production, growth and valuable set of assets make them a very desirable company in the eyes of the big players.
What Risk Factors to Account For
REXX is not immune to everything and if there is a weakness it’s the concern in their liquidity going forward especially if gas prices were to fall much lower. Investors shouldn’t be all to concerned however as we continue to see management effectively combatting this issue and in the past they have always found ways to keep production fully up and running so we have no reason to doubt that they would stop such efficient business practices now. In addition, Rex still has various assets for sale, which have helped provide a safety net if liquidity issues were to ever arises. After examining the books, it looks like REXX is in a much better financial situation now then it was just 9-months ago which is a good indicator going forward. When we first recommend Rex, the company had about three years of liquidity before they would have had to start cutting back on their drilling program or finding other sources of cash. Today’s current rate shows Rex has well over four years worth of liquidity, an optimistic sign for investors and further proof of management’s effectiveness.
Increased Spending Followed By Increased Expectations
Going forward expect Rex to continue to perform exceptionally well as they increase the amount of capital they’re spending on production, which in return should deliver much higher revenue numbers. When talking about the successful recent tests and the future potential in the region Rex’s CEO, Tom Stabley, said, “that the company believes the past results demonstrate the huge opportunity that exists for continued superior well performance in this region going forward.” Stabley used these tests as a key reasoning behind the company’s huge capital spending program. Rex isn’t the only one increasing their spending either as both Gulfport and Magnum Hunter Resources are following suit and spending a large portion of their 2013 capital budget on the play. With such a huge increase in capital spending, expectations are very high, as hopefully the move will prove it’s worth generating significant liquids-rich growth for all three companies.
Overall Long-Term Outlook
Overall, we continue to be very Bullish about Rex Energy anticipating huge liquids growth production coming from the Utica shale. As a result we expect REXX shares to continue to outperform their peers and as a result we are raising our original 12-month price target from $18.50 to $20 per share, a total net yield of 72% on the year and an additional 32% from the current stock price.
Delaying making investments in order to launch your career can cost you dearly later on. Smaller investments made between the ages of 18-25 will yield much greater returns than larger investments made later on over a longer period from ages 26-65. Consider the classic parable taught in many basic economic courses:
Jack decided not to go to college. He got a job at 18 and invested $4,000 each year into an IRA. He stopped after eight years after investing a total of $32,000. His sister, Jill, went to medical school, started her medical practice at age 26, at which point she began contributing $4,000 to her IRA. Jill did this for 40 years from 26 to 65. She invested a total of $160,000 and put her money into the same investment as her brother. Jill started investing the same year Jack stopped, and she saved for 40 years compared to just eight years for her brother.
By age 65, whose IRA account do you thing was worth more money?
Assuming both Jack and Jill earned a 10% annual return, Jill accumulated $1,327,778. But Jack had $1,552,739 – $224,961 more than his sister!
|8 Investments ($4,000/yr) – Ages 18-25||40 Investments ($4,000/yr) – Ages 26-65|
Ultimate value at age 65:
Ultimate Value at age 65:
Jack’s account grows to a higher value because he started sooner!
Jack stopped investing at age 26 having invested only $32,000 to Jill’s $160,000. But Jack’s money earned interest for eight years longer than his sister. It wasn’t the money that made him successful – it was the time value of money. Jack didn’t put off investing when he first launched his career. By investing sooner than Jill, his account grew larger.
The moral of this story is not to forego a college education and its promise of higher earning potential. No doubt, Jill earned more disposable income during her career. But Jack’s investment head start was far superior, resulting in substantially greater savings.
Without question, procrastination is the most common cause of financial failure.