In Part I of my Feng Shui and Stock Market Forecast 2014, I made my forecast on the 2014 performance of various asset classes such as US stocks, European stocks, emerging market stocks, US bonds and commodities. In the post, I forecasted that European stocks are likely to be the clear steady winner in terms of performance while US stocks are likely to fare the worst. I also have bullish outlook on commodities, particularly the metals and agricultural commodities segment.
Nonetheless, no forecast on the stock market is complete without a discussion on the industries or sectors which will perform well in a given year. So which sector would I place my bet on in 2014? Obviously, since I am bullish on the commodities, it follows that investing in commodity-related stocks will be a good start. Commodities stocks have been massive under-performers over the last few years. In 2014, this trend is likely to reverse and commodities stocks should take over the leadership from other sectors like consumer staples and technology.
Wood and Fire Stocks
2014 is the year
of Wood Horse. Since the element associated with Horse is Fire, industries related to Wood and Fire are likely to perform well. Moreover, the Annual Ruling Star in 2014 is Star No 3 which is also of Wood element and since Wood produces Fire, industries associate with Fire should do extraordinary well.
Industries associated with Wood Element includes Timber trading, Furniture, Construction, most plantations, etc. Industries associated with Fire Element includes oil & gas, energy, most Food and Beverages, LED and other Display, etc.
My strongest conviction among these industries is the renewable energy stocks (particularly biofuels
and solar-related) and LED stocks. Biofuels, solar and LED stocks have underperformed the markets very badly over last few years and this year should see them steal the limelight.
From a Feng Shui point of view, biofuels (corn or sugar ethanol, rapeseed or palm oil biodiesel) belongs to Wood-Fire Element which gels with 2014 Elements. Though rising agricultural prices will increase the feedstock costs of these companies, demand for biofuels should be strong and these companies will be more than able to pass on the cost increase to end-consumers.
How strong is my conviction on biofuels and solar sectors? Well, I will just say that the Feng Shui factors for these two sectors in 2014 is almost identical to the ones present in 2013 for Tesla Motors.
Tesla Motors - beneficiary of good Feng Shui in 2013
One only has to look at the share price performance of Tesla Motors to have a feel on how well these two sectors will perform in 2014. The share price of Tesla Motors went up several fold in the last 12 months. From a Feng Shui perspective, cars are associated with Metal Element while battery-operated cars from Tesla (especially model S) are associated with Water-Fire Element. 2013 happens to be the Year of Water Snake which is associated with Water-Fire Element. The predominant Element of Snake is Fire but it also has hidden Earth and Metal Elements. Thus, from Feng Shui perspective, it is not surprising that Tesla Motors did very well in 2013.
Solar Stocks
The solar industry has been hampered by overcapacity in the last few years. During the last few years, several solar panel companies have filed for bankruptcy. Prices of poly-silicon, a raw material used in the production of solar panels, plunged to a multi-year low. Countries like U.S., China and Europe start to impose stricter tariff on imports of solar components to protect their local companies. I believe that after the shakeout in the last few years, the solar industry is poised for a recovery aided by the positive Feng Shui influence in 2014. It is interesting to note that most solar-related stocks such as GCL Poly and OCI Co bottomed out in mid-2013 and the share price has picked up quite significantly. From Feng Shui perspective, the first half of the Water Snake Year is marked by Water Element which is inauspicious for solar stocks. In the second half, the Fire Element of the Snake took over and it boosted the sentiment towards the solar stocks which are associated with Fire.
Biofuel
Among the three sectors I am particularly bullish on, the biofuel industry is the one which will enjoy the most favourable Feng Shui in 2014. Biofuel (ethanol and biodiesel) are energy sources that make use of agricultural crops such as sugar, corn, rapeseed, palm oil, etc as feed stock to produce energy. Sugar and corn are feed stocks used produce ethanol which are often blended with gasoline to fuel gasoline-powered cars. Rapeseed and palm oil are often used to produce biodiesel which are blended with diesel to fuel diesel-engine cars. Different countries have laid down different mandates on the blending of these biofuels with gasoline or diesel.
U.S. is the largest producer of ethanol. US ethanol production has grown rapidly in the last several years. The ethanol market share in the US has grown from over 1% in 2001 to 10% in 2011. By 2011, most cars can run on blends of up to 10% ethanol. Some E-85 flexi-cars can run up to 85% ethanol. Despite the strong volume growth, most ethanol companies have not been performing well as rising cost of feed stock (particularly corn) has eaten into their margins. Most companies rely on subsidies from the US government to remain viable. However, these subsidies expired in December 2011 which dealt this industry an extra blow.
In Europe and Asia, the blending of biodiesel into diesel engines has also been gaining steam in the last several years. Despite the Eurozone crisis in 2011-2012, most European countries have mandated the blending of biodiesel with diesel. Like in the case of US ethanol companies, most biodiesel companies have been adversely affected by the weak crude oil prices following the Global Financial Crisis in 2008 and the subsequent strong feed stock prices.
In 2014, the biofuel industry will see an increase in demand due to the recovery of global economy. While I expect to high feed stock costs to persist, my view is that this will be more than compensated by higher biofuel prices as demand for gasoline, diesel and biofuel increase. In the first half of 2014, this industry will benefit from the Wood Element. In the second half, the Fire Element will even be more beneficial. Thus, 2014 should see steady and strong performance of biofuel stocks.
Light Emitting Diode (LED)
Light Emitting Diode (LED) is used mainly in backlight units of television sets with LCD screens. It is also an energy-saving alternative to conventional light source. Just like the solar industry, over the last few years, the LED industry has been hampered by overcapacity woes. Despite its energy-saving characteristics, the switch from conventional light source to commercial LED light has been slower than expected due to the huge price premium the latter commands. Most of the demand has come from governments' buying while demand from the private sector remains lacklustre.
In Feng Shui, the LED industry is associated with the Fire Element. Both the Wood and Fire Elements of Wood Horse in this year are favourable to its prospects. Meanwhile, the last few years have seen several leading LED module and packaging companies successfully removing a large part of inventory overhang. Along with continued increase in demand from official buying, a turnaround in 2014 is in sight. Overall, I am optimistic on the prospects in LED industry in 2014.
Conclusion
In summary, sectors which are wood-fire or fire only-related will do well in 2014. Commodities-related, Food & Beverages, Oil & Gas, etc are some industries which will enjoy good Feng Shui. In particular, I am bullish on solar, biofuel and LED sectors.
Update: For timing stock market correction in 2014, please refer to Feng Shui and Stock Market 2014 - Timing Stock Market Correction in 2014.
Update: For timing stock market correction in 2014, please refer to Feng Shui and Stock Market 2014 - Timing Stock Market Correction in 2014.
No comments:
Post a Comment