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Booming Economy and Hot Sectors

With the Canadian economy booming and seeing so many M&A’s and private capital buyouts all over the world, I get an impression of huge amounts of cash sloshing about. It’s pretty amazing how many companies are being bought out and taken off the market:

So far this year, according to Standard & Poor’s, 217 publicly traded U.S. companies have gone private. With only 107 U.S. companies going public, that’s a net loss of 110 stocks this year alone. (“3 hot sectors where shares are scarce”, Jim Jubak)

And it feels like I’m missing out on all the action! How does this activity and abundance trickle down to the “regular people” who don’t have billions of dollars, or even millions?

The boom is largely due to the natural resources – gas, oil, and minerals. Unless you have something to do with exploration, selling or developing resources and mines, the only way to benefit from the boom is to invest into the mining stocks. But my vision is skewed at the moment because I’ve been reading about mining companies non-stop for the past 2 months.

There are of course other sectors that are experiencing a surge. Other “hot” industries are:

  • Financial services
  • Fertilizers
  • Steel production
  • Railroads

Most stocks in these categories are pretty expensive (not in terms of their P/E, but in terms of dollars per share). I prefer smaller “plays”, with cost under $10, under $5 is even better. You can find some cheapies among fertilizer producers but I will not invest into this particular industry. I’ll discuss separately the reasons (a draft is in the works) and it has nothing to do with the financial fundamentals.

It’s also starting to look like the boom is nearing the end, so despite my intense “investment fever”, I’m going to pace myself. After all I’m very new to investing, still have a lot to learn.

Taking a more conservative approach to my investment results for the year, I figure as long as I break even this year, it’ll be fine. The experience itself will be a valuable gain.

If there’s a market downturn, I’m sure there will be another boom in my lifetime, and likely more than one. By then I’ll have the knowledge to fully participate.

It’s wiser to take a slower approach and learn, because at the beginning you won’t get many second chances. It’s critical to not lose too much at the start, for both mental and financial reasons.

Going to update our Portfolio now.