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| December 30, 2009 Dear Friend,
We believe the key investment
question in 2010 is "when to take profits" from the rallies off
March 9, 2009 stock market lows. We expect next week to see
large inflows into the stock market with new 2010 pension, 401K
and other retirement plan annual contributions. Further,
reallocations into common stocks are likely from bonds, gold,
cash or money market funds.
We are most nervous about
nonferrous base metals shares owing to price appreciation and
large second-half 2009 inventory buildups. However, we have
maintained 11 Overweight ratings in diversified mines, copper
and nickel-related stocks. As stock prices rise, investors will
demand higher levels of recurring profits to justify valuations
and investors will show little patience with net losses.
Steel, aluminum and wood
stocks are candidates for strengthening if U.S. auto and housing
markets enjoy especially brisk 2010 rebounds more than we
expect. Those shares did very well in the 2009 second-half in
anticipation of upturns.
We have made many "bottoms
up" decisions one-on-one. In the past month we raised price
targets on Allegheny Technologies, Vale and Weyerhaeuser and
upgraded Greystar, Agnico-Eagle and AngloGold Ashanti. We
downgraded U.S. Steel and Plum Creek to Neutral from Overweight
due to price appreciation.
We currently have a bullish
bias with 18 Overweight ratings, 13 Neutrals and just 2
Underweights. It is likely that our 2010 ratings shifts will be
to a less aggressive bull posture as the year develops.
Faithfully,
John C. Tumazos
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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