Growing Rich - Arabictrader.com

KIRK KAZANJIAN
companies are sure to be affected. But they could be helped or hurt,
depending on what actually happens. If we know these bad storms
are supposed to hit southern California, Mexico, Arizona, and the
Southwest in general, while leaving the east and gulf coasts unharmed,
insurers could be helped. The reasoning behind this is that there are
more people and assets, and therefore a preponderance of insurance
policies, on the east and gulf coasts. If insurers have to pay reduced
damage claims in those states, they would benefit financially.
“Keeping with our El Niño bull’s-eye, I might then turn my attention
to food processors, who will be helped or hurt depending on whether
or not crops are damaged,” Stovall continues. “Then I would look at
fertilizer stocks. If El Niño causes a serious drought in the Asian basin
and parts of Latin America, that will reduce crop yields and result in
more fertilizer being laid down in the temperate zones, such as Argentina,
Canada, and the United States. These areas would have to plant
more crops to make up for the grain shortfall. As a result, prices of
agricultural commodities would rise and the stocks of farm equipment
companies could also go up. So the big picture is El Niño. The middle
picture is the potential consequences from it, namely damage and
droughts, and the resulting impact of those events. Then, you move
to the smaller picture, or actual bull’s-eye, to find which specific
stocks you might want to buy that would likely benefit from the full
development of this concept. Assume I believed insurance damage
was going to be minimal and that a resulting drought would cause a
rush on fertilizer. That might cause me to purchase shares of Chubb
and Potash Company of Saskatchewan as a play on El Niño.”
Granted, this technique requires some educated guessing on your
part, but it is based on factual data. “I use this process every day,”
Stovall adds. “Each time I read the paper, or see something on TV, I
say to myself, ‘Which companies will be helped or hurt by this?’” This
is something you, as an individual investor, can do as well. The next
time you watch your favorite news program, pay attention to every
story, especially those about hot new trends, promising products, and
revolutionary discoveries. Let the stories be your emerging target.
Then ask yourself which industries might be helped or hurt by them.
Finally, go out and find individual companies that specifically stand
to benefit from the consequences of this bull’s-eye. Later in this book
you will learn various techniques for evaluating the attractiveness of
a stock. However, you must first have a shopping list of names, and
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