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The Most Hated Asset Right Now

By Dr. Steve Sjuggerud
Thursday, January 25, 2018

Everything's up!
 
Heck, everything is up a bit too much lately, right? People are starting to feel good about their investments again...
 
Is there any sector or asset that hasn't soared?
 
Actually, yes...
 
While stocks have soared seemingly nonstop for years, this major investment class has performed downright terribly. Take a look:
 
Year
Return
2011
-10.7%
2012
-3.2%
2013
-13.2%
2014
2.6%
2015
-17.2%
2016
-3.1%
2017
-6.1%

In six of the last seven calendar years, this investment has lost money.
 
And in 2014 – the one year that it managed a positive gain – it only went up 2.6%.
 
While stocks have absolutely soared, this investment has lost nearly half its value since its 2011 peak.
 
What is this asset class? It's agricultural commodities...
 
Specifically, those are the returns for the PowerShares DB Agriculture Fund (DBA).
 
It holds a broadly diversified portfolio of agricultural commodity futures. Here's the latest breakdown of its top holdings:
 
Commodity
Weight
Soybeans
12.9%
Corn
12.7%
Wheat
12.5%
Live cattle
12.5%
Sugar
12.0%
Coffee
10.9%
Cocoa
10.2%

You might imagine – after seven years of bad returns – that investors have given up on these commodities. You would be right...
 
Jason Goepfert of SentimenTrader.com does excellent work analyzing investor sentiment. And these days, basically all these agricultural commodities are at the bottom of his scale.
 
Nobody likes them... And that gets me interested!
 
I love to buy what's cheap and hated. It's incredibly challenging these days to find an asset class that fits both.
 
But after a severe seven-year bear market, agricultural commodities might just be the most hated asset class.
 
They are cheap. They are hated. They are just missing the final piece before I'll pull the trigger... We don't have a real "uptrend" in sight – yet.
 
Everyone has given up.
 
This is the position where big gains start.
 
I'm not bold enough – yet – to be a buyer. But I will be a buyer when we finally see an uptrend.
 
If you're looking for a hated asset that can rise whether stocks are going up or down, then you'd better put agricultural commodities on your watch list.
 
Shares of DBA are the easiest way to play it, once the uptrend finally returns...
 
Good investing,
 
Steve




Further Reading:

Commodities are incredibly cheap relative to stocks. And this rare extreme could lead to big gains, based on history... "We may be in the early stages of another multiyear boom," Justin Brill says. Read more here: This Notoriously Cyclical Sector Is Starting to Boom.
 
"Almost all of the time, I tell you to buy what's hated and sell what's loved," Steve writes. But while stocks are overly loved today, he says the rules could be different this time... Learn more here: Today's Record-High Optimism Doesn't Mean You Should Sell.

Market Notes


THE BIG BANK RALLY MARCHES ON

Today's chart highlights the strength of the banking industry...
 
Longtime readers know we like to check in on America's big banks from time to time. Firms like JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC) are America's "financial backbone." They rise and fall with our country's ability to make money, save money, service debts, and generally "just get along." Today, we look at another major player in the industry...
 
Morgan Stanley (MS) is one of the biggest banks in the U.S. For more than 80 years, it has been a wealth-management leader – and it's still going strong. Last week, the company beat analysts' expectations for quarterly sales and profits... Plus, clients are entrusting it with more of their hard-earned cash. Its Wealth Management business now oversees $2.4 trillion in assets... And revenues for that division grew nearly 10% since last year.
 
As you can see in the chart below, shares are now up around 40% from their May lows. They recently hit a fresh 52-week high. This banking giant is more proof that money is flowing in America...
 

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