My trading strategy is fairly simple. I identify a dominate theme and then buy leading stocks in that theme. This has worked quite well for me over the years. Back in the good old days it was the Internet and stocks like AOL (TWX), CMGI (CMGI), Cisco (CSCO), Intel (INTC) and Microsoft (MSFT). Over the past three years, it has been industrialization of the emerging markets. This led to the formation of my Big Build-Out (BBO) portfolio and stocks like Companhia Vale do Rio Doce (RIO), Southern Copper (PCU) and BHP Billiton (BHP).

Most recently I have formed The Big Spend (TBS) portfolio to capitalize on the new wealth being created in the emerging markets. The thinking is that people in the emerging markets are no different than ones in the developed markets - money burns holes in their pockets too and must be spent. Stocks like Apple (AAPL), Nokia (NOK) and MasterCard (MA) form the nucleus of the TBS portfolio.

This strategy also keeps me away from themes where I can't identify a driving catalyst. A few weeks ago I wrote an article, Homebuilders Rallying: How Could This Be? The Homebuilders ETF (XHB) was rallying, but why? Are interest rates going down? Nope. Have the homebuilders sold off their bloated inventories yet? Nope. Has the guy down the street sold his house yet? Nope.

Using a fundamental theme as the first screen convinced me to ignore XHB's technical buy signal. It looks like it was the right decision.

By Michael K Dawson
http://www.thetimeandmoneygroup.com/

Copyright © 2007 Michael K Dawson
Michael K Dawson founded the Time and Money Group with the aim of educating and sharing 20 years of experience on how to reach financial freedom. "Financial Freedom is freedom to focus on what is truly important to you and your family without having to trade time for a wage. It is enabled by a portfolio of income producing assets, managed by you, which generates sufficient income to cover your yearly expenses on an ongoing basis. It provides both time and money". The intent of his website is to become a repository of information to put you on the fast track to becoming financially free. For further infromation visit http://www.thetimeandmoneygroup.com/

Michael K. Dawson Archive

Comments

Bill
18 Jun 07, 01:23

Homebuilders Stocks Rallying

A look at the full chart (18mo) for XHB would have shown that the down trend line had not been broken yet , although close buy points occured . Still I believe the chart shows a reversal of the down trend . currently .Julys lows are a ways away right now . thanx -Bill

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