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COMMENT
US releasing oil from SPR today. Government policy has made a bit of a mess of this energy cycle. On one hand, pushing a green energy approach. But in the short term, we just don't have the supply to let us do that. Structural deficit in energy production is causing high prices. Releasing oil from the SPR is a drop in the bucket, but they're also handing out stimulus cheques for high gasoline prices, which encourages people to buy more gas. Government's doing everything it can to fight inflation, and prices at the pump are target #1.
COMMENT
Stagflation. That's where prices are going higher and growth comes off the boil, but doesn't have to be recessionary. It's a real threat, with some of the highest inflation since 1970s-80s. Certain sectors do well, and others suffer. Stocks that do well are those that are part of the supply chain, are a scarce resource, and have pricing power: energy, commodities, materials, chemicals, base metals. Consumer staples margins get squeezed. You want to barbell high quality, cash flowing cyclicals such as energy and materials. Avoid some of the most expensive stocks and stocks that need expensive inputs for their products.
BUY
Still extremely cheap, despite the run up last year. Lumber prices are back above $1000 again. Huge cashflow at these prices. Concerns US housing market will slow, but there just isn't enough supply, so demand will persist. No debt, good price momentum and valuation. Can buy here.
west coast forestry
PAST TOP PICK
(A Top Pick Apr 09/21, Up 30.65%) Good price momentum and valuation. Solid ROE of 36%. Not an unreasonable price. Quite a bit of demand for this asset class, takeover targets. Won't do well in a recession, but we're not there yet. You could still buy today, hold until momentum and valuation run out.
food processing
