Investment Musings for 2014

 | Nov 25, 2013 | 12:00 PM EST  | Comments
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It's that time of year again where the marketing mind of Wall Street kicks into high gear and begins turning the discussion to next year. Pretty soon, the ten or so magazines I subscribe to will deliver to me the "Best Investments for 2014" editions, or top pundit predictions for next year. It's certainly fun to see what makes the cut, but a wise man once said that the weather forecast tells you more about the forecaster than the actual forecast.

That being said, I will venture into this sandbox of what's ahead for 2014. Instead of going granular on you, however, I'm going to stick to broad themes that I think are worthy (to varying degrees) of further intellectual research for potential opportunity.

The first theme is piggy- backing off of Goldman Sachs (GS). In case you don't know, this week Goldman begins their top ten macro themes for 2014 -- for the next week and a half, Goldman will postulate one macro theme they recommend going into 2014.

Theme one is to continue going long the S&P 500 along with shorting of the Australian dollar. Goldman views the current monetary underpinnings in the U.S. still create a favorable environment for equities. As these are macro themes, Goldman is saying go long the whole market, and is touting specific picks.

I think the macro picture is quite important but I'm trained, for better or worse, to focus on the micro picture in context of the macro picture. To that regard, I have a couple of thoughts that I think could prove interesting in 2014.

One: U.S Government Exits Stake in General Motors

If U.S. doesn't sell it's it stake in General Motors (GM) by 2013, it will likely do so early next year. The last count was that Uncle Sam now owned around 2% of GM. The government has made it public that it desires to sell its position in GM. When that happens, I believe as I've said all along, the anchor on GM's stock price will go away. In fact, this is starting to happen: during the past several weeks, GM shares have been climbing higher. More so, I think operating results for GM will continue to strengthen over the next couple of years. This will happen not only because new car sales are rebounding, but because GM is a much leaner, less leveraged enterprise. But knowing that Uncle Sam no longer has a say will go a long way attracting new investors to the table.

Two: Natural Gas

Barring any downward shock to the price of oil, natural gas could really pick up steam in 2014. Natural gas is clean, incredibly cheap, and the U.S. has a competitive advantage in producing it, thanks to fracking. Not only are plants being built to export natural gas but more importantly, natural gas is creating a manufacturing boom in the U.S. Overseas companies are building plants

in the U.S. that will run on cheap natural gas. Those plants will create jobs and so forth. Chesapeake Energy (CHK) will be a key beneficiary of continued demand in natural gas. But so will Exxon Mobil (XOM) as it became a key player in the space when it acquired XTO Energy a couple of years back. Interestingly enough, Exxon was the most significant equity purchase for Warren Buffett in the third quarter. On the smaller side, EXCO Resources (XCO) is a favorite pick of turnaround specialist Wilbur Ross.

Themes are just that, ideas that may or may not play out. But all great investment ideas begin with a theme that can either be specific to the business in question or relate more to the industry involved. But even with themes, they should be substantiated with facts and figures to create a tangible investment idea.

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