Value Investing / Main Index / previous / next

October, 2010


When I was growing up, the concept of Halloween was sort of mixed up in my mind. I thought the question of trick or treat was to be answered by the people who opened the doors for the kids. Would they give us poisoned candy or razor blades stuck into apples, or instead would they be nice and offer us real goodies? In this investment essay, that is the way I mean the title. Here for your Halloween pleasure are some investments which may well provide great total returns or could instead turn out to be quite disillusioning!

The portfolio I propose, like what our childish imaginations may often conjure up around this time of year, is a blend of high risks. If all goes well, they will balance each other out in ways that can make the investor a lot of money. On the other hand, the outcome might just be the financial equivalent of a rather ghoulish end to Halloween night. Though tempted to try it myself, I cannot really recommend this approach to anyone else, and the would-be investor ventures into this realm very much at her or his own risk.

For my first trick, then, I suggest five high growth securities. Momentum investors should love them. For these selections, I have chosen a few commodity related stocks or exchange traded funds, aiming for equities that should do reasonably well in times of a falling U.S. dollar and/or of increasing inflation, something many are worried about as combined debt levels are mushrooming. Feast your eyes on these little horrors:

Commodities Related Assets

ETFS Physical Palladium SharesPALL$59.12
ETFS Physical Platinum SharesPPLT$169.88
Petroleo BrasileiroPBR$34.74
Silver Wheaton Corp.SLW$27.48
SPDR Gold SharesGLD$134.07

My second trick involves five reasonably high yield assets, to give our combined portfolio a better than average level of income, for those victims who like to be paid while they await the Grim Reaper's personal interest. Here are my picks in this category:

Income Related Assets

Annaly Capital Mgmt., Inc.NLY$18.00
France TelecomFTE$22.53
iShares JP Morgan USD Emerg. Mkt. Bd.EMB$113.60
Royal Dutch Shell plcRDS/A$63.22
Vodafone Group plcVOD$26.24

Finally, in case we have provided insufficient scariness to excite you as yet, my final trick involves some strategic short-selling. Here are several securities (though hardly "secure-it-is!") which have such poor value for their price that, on average, I expect them over time to go down, providing short seller profits as a hedge against things not working out so well at times with the other two "legs" of this Halloween fable, er, make that table. Here are my picks for assets overdue for a bit of really bad news:

Short-Sales Assets

China Shenghuo Pharmaceutical Holdings, Inc.KUN$0.56
Delta Airlines, Inc.DAL$11.58
Direct TVDTV$42.45
Herman Miller, Inc.MLHR$19.93
Saul Centers, Inc.BFS$44.46

Once a person has collected all 15 of these misshapen visages, I propose simply letting the investments ride until one or another category is at least 10% above/below the others, at which point they should be rebalanced. If all goes according to this witch's brew plan, you should find the results fiendishly delicious. Of course, there is also the alternative. Please note that the week-to-week volatility of this mix could very well add or subtract thousands from your overall portfolio. So I think folks should only invest using this strategy if they have already sold their souls, or at least have extra funds available, for some serious speculation.

Assuming one discovers a taste for this "double, double, toil, and trouble" concoction, it is also advisable periodically to refresh the assets used for one's momentum, income, and short-sellers hedge ingredients. Yet beware! I have it on good authority that "something wicked this way comes."

(To repeat, the foregoing is not considered an appropriate technique for most investors. Vampires, ghouls, zombies, and such, however, might like to try it.)


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

Value Investing / Main Index / previous / next