Thinking about AgFeed

Found an interesting paper on the Chinese cycle of pork prices. According to this paper, the cycle lasts 42.33 months (on average). Pork prices peaked in the summer of 2008, which puts us at the bottom of that cycle right now. I hope to realize substantial gains between now and 2012. AgFeed, even with pork prices as low as they are, has almost no debt and is still making a profit. Why is FEED so cheap? Am I way ahead of the curve or missing something?

The link to the paper won't work. See: www.prairieswine.com/database/pdf/39650.pdf.

Jim Cramer is Alright with Me

Jon Stewart may think Jim Cramer is an asshole, but he's alright with me. When I decided to open a brokerage account two years ago, it was his show that I watched everyday and it was he who got me excited about investing. I've read Real Money and Stay Mad for Life and I liked both of them.

I took a look at my excess returns for 2010 and there's some advice that he dispensed in Real Money: Sane Investing in an Insane World to which I should have paid closer attention.

Now, I'm paraphrasing, but Jim said amateurs worry about not making enough money, and professionals worry about making too much money. At first, that statement pissed me off. It seemed like the sort of formulaic advice that's hip right now: take something that everyone thinks is true and just say the opposite. Are you drowning in the sea? Don't try to swim, try to sink! Then, when you get into the details of the advice, you realize they're actually recommending swimming, not sinking. A lot of articles on the internet are set up like this, just to catch your attention. It's bullshit. However, in the context of excess returns, that's actually awesome advice. In May of this year, I had returns 25% greater those of the Dow Jones. That was an aberration. I'm not good enough at investing to sustain returns that high. Had I really understood the advice, I would have either sold out of a few of my positions and held cash, or gone long puts to protect myself against the inevitable correction. Too late on a smart play, AGAIN. Oh well, I have to learn these lessons to get better, right?

Excess Returns and crazy AgFeed volume

Relative to the Dow Jones, I'm still doing pretty well for the year. Had you invested $100 with me on January 1st, it would be worth $10.00 more than if you had put it in the Dow Jones.

I've also updated the look of the blog. Blogger now has some fancy pants new designs, so expect changes. I ditched the clunky Fidelity widget for Yahoo! Finance's and I'm going to change the program powering my comments.

Yesterday, 313,426 shares of AgFeed were traded. Google Finance lists the average daily volume at 642,000. Today, 4.82 million were traded. I have no idea what caused that. Other US-traded Chinese agri-stocks had similar jumps in volume, but not other Chinese ADRs. An appreciating yuan only helps these agricultural firms, but I don't get the jump. It seems excessive.

Update 06/15

I hope we can keep this rally going. I was down 7% for the year at one point, from a high of positive 18%. I added money to my portfolio earlier this month and doubled my position in AgFeed. I'm up 9% on that investment so far.

What does it mean to have such a strong rally on low volume?

Some honesty

I'm not having a good year. My fiscal "Year 1" (October 1, 2008 through September 30, 2009) was pretty good. I had a return of over 21%, easily beating the Dow Jones and S&P. Below is a graph of my YTD returns, "Year 2" (October 1, 2009 through May 24, 2010).
I've been posting my cumulative returns on this blog, so while I'm still beating the Dow Jones since October 2008, I would have been better off since October 2009 if I had put all of my money in an index. In fact, after the 11%+ plummet in the market this month, I'm down for the year.

Obviously, this market correction was an opportunity. After being extremely patient, last Thursday I moved some more money into my brokerage account and doubled my AgFeed position. I bought shares at $3.03, bringing my average cost down a full dollar per share (from $4.98 to $3.98). AgFeed started rallying today on good news out of China, ending the day up 6%+. I think I nailed that one.

Greece did that?!?

Investor A: "Good G-d! What is that unbearable whooshing sound?"
Investor B: "That's the stock market plummeting past us."
Investor A: "Was it pushed out of a window? It's falling so fast!"
Investor B: "It may have been, ask those guys over there."

CEOs of the Nasdaq and NYSE point accusingly at each other

I guess the past six days made for a useful experiment. I had previously estimated that my portfolio had a beta of 2. If the Dow Jones were to rise 1%, my stocks should rise by twice that. So now that the Dow Jones has dropped more than 7% in the past six days, my portfolio has fallen, as expected, about 14.5%. Math high five!

MGM asploded!

Thanks to my sizable position in MGM Mirage and its spectacular week (up nearly 23%), I'm up 10.43% in 5 days. Over the same 5 days the Dow Jones has risen 1.3%.

Only five mutual funds tracked by Morningstar have outperformed me this year: Birmiwal Oasis, Profunds Banks UltraSector Inv., Fidelity Select Banking, Rydex S&P SmallCap 600 Pure Value C, and Fidelity Select Transportation.

Now, all I need is for pork prices in China to stabilize.