The Trade Idea: After last week’s development in OIL’s Quantitative Gravity, I would avo...
Selling Sempra Energy to Raise Post-Correction Bargain Hunting Cash
10/15/2014 12:30 pm EST
Now that the US stock market is in the midst of what looks like a good, ol' fashioned 10% correction, MoneyShow's Jim Jubak is selling his shares of this solid play on the US natural gas boom, as of today, October 15.
I added the shares of the portfolio on September 3 as a good buy in a market that was near all time highs. (The Standard & Poor's 500 hit an all time high on September 18.) The stock combined a regulated utility-which paid a solid dividend-with growth prospects from exporting natural gas either to Mexico via pipelines or to Asia and Europe via a newly permitted liquefied natural gas terminal. That made Sempra a solid way to play the US natural gas boom without paying the premium commanded by first-mover Cheniere Energy (LNG), also a member of my Jubak's Picks portfolio.
But now the US stock market is in the midst of what looks increasingly like a good ol' fashioned 10% correction and I'd like to be sitting on more cash so that I'll have the money to buy any bargains created by this increased volatility. I'm particularly looking for any excessive selloff in a high multiple growth stock. You know the kind that gets clobbered for a 40% loss in this kind of downturn but that has the potential to bounce back with a 60% gain.
You can think of this sell as a bet that the correction will create more profitable opportunities than the gain I anticipate from holding Sempra Energy.
The stock hasn't fallen very much (3.8% on price and 3.2% (if you include the quarterly dividend that will be paid to shareholders of record as of September 25 on October 15)) from my initial buy on September 3. As a result, this sell will free up pretty much a whole position for a buy in my Jubak's Picks portfolio whenever I decide to pull the trigger. I've now got the proceeds from my recent sells of Sempra Energy, Vale (VALE), Mitsubishi UFJ Financial (MTU), and China Life (LFC) to put to work when the correction looks like it has run its course.
Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I managed, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund shut its doors at the end of May and my personal portfolio is now in cash. I anticipate putting those funds to work in the market over the next few months and when I do I'll disclose my positions here.
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