by winston » Sat Jan 10, 2009 12:07 am
THE INFRASTRUCTURE REBOUND IS GOING GREAT GUNS by Brian Hunt
It's been another big week for our "rebound trades."
In early December, we identified three assets that would soar when the inevitable market rebound showed up: Gold-mining stocks, emerging-market stocks, and infrastructure stocks. Since these assets suffered the most during the market crisis, our take was that they'd rebound the most when the crisis cleared. And rebounding they are. Take our infrastructure play, Shaw Group (SGR).
Yesterday, power-plant builder Shaw reported a small quarterly loss on an 11% increase in revenue. The report was a "things aren't great, but they aren't terrible" kind of thing. Since Shaw was sold to such a depressed level last fall, the "not terrible" news shot the stock up 22% on the day... and up an incredible 70% since we marked it for rebound.
The action in Shaw is a good sign for the infrastructure sector, but more importantly it's a timeless lesson for speculators. When folks get scared to death of an asset – whether it's land, oil, bonds, or stocks – they often sell it down so far that it gets "priced for Armageddon." When Armageddon doesn't arrive, and the clouds clear just a little bit, the asset can easily double or triple your money in just a few months.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"