The Spend Management (and MetalMiner) Investor: Where We're Placing Our Market Bets

Given the relative lack of regular readership this holiday week, rather than tackle a procurement topic for companies in this post, I thought I'd engage in one on a more personal note that I hope might be perhaps useful for Spend Matters readers -- personal investment strategy. As many of my personal friends and family that I know who read this blog, I'm a wearer of many different hats. Even though I spend most of my waking hours these days spending time digging into procurement and supply chain solutions, I also maintain an active interest in a small time corporate development (primarily M&A) advisory practice. And before my wife made me close out all of my positions before I got married years ago, I actively traded a range of options in the tech market on my own account. To this date, even though I don't maintain any active futures/options positions, I am still a closet personal trading junkie who still gets as excited when he hears the term "covered call" or "naked put" in casual conversation as the utterance of "Lafite Rothchild" or "Chateau Ausone" when a glass is destined my way.

For much of the past few years, both my wife and I have largely been on the sidelines when it comes to investing much of our portfolio (except in our growing business). Despite tracking commodity markets as a small part of my job (and nearly all of hers, in the metals markets), we have not felt the compelling need to be in anywhere but greenbacks given the uncertainty of the broader economy and domestic financial situation. Yet we recently decided the dollar is probably not the best place to be for a variety of reasons and thought our retirement capital would be better put to use in the market, at least the speculative components of the portfolio. After this realization, we searched high and low for sectors to place our hopefully educated bets.

We ruled out technology (at least technology that we cover on the sites) for the logical potential conflict reasons -- and also because it scares me how little many investors and stock analysts know about the inner workings of places like Ariba and SAP, not to mention how customers actually use the tools themselves. We also think broader market indices (e.g., S&P) are probably towards the top of their game at the moment, but we're too wussy to consider a short play. And given their run up in the market, many commodities worry us because it's hard for us to speculate how much current demand is real demand or simply speculation or hoarding.

But after much dinnertime and office debate and research, we decided earlier this fall that two commodities represent what we believe to be a potentially strong opportunity in the coming 12-18 months for those, like us, who have the time to stay actively on top of their positions. Neither of these two commodity areas has seen strong run-ups in the market like other commodities earlier in the year. These two commodities, steel and platinum, also have a partial hedge built in given the precious metal component -- in addition to the industrial uses -- of the latter and the cyclicality of the former, based on the current timing and conditions in the market (as we see it). So we decided together to purchase a market basket, fairly evenly weighted, of global steel company stocks. And we also purchased shares in a physically backed platinum ETF. Both have done well so far.

We'll probably get out of these positions the next time we update the more speculative component of our investment strategy in the 2011 holiday season unless readers are curious on a more regular basis about how two procurement and commodity watchers look at how to manage their retirement accounts. And who knows, perhaps, if there's enough interest, we'll make this a more regular thing on the commodity side of the investing house.

Last, check back in the coming days when I offer a post on why I've shied away from software companies like Ariba in my own investing, despite the value they bring to customers and recent growth trends. In this coming post, I'll also offer tips for getting to the bottom of what really goes on inside enterprise software companies if you care to take the plunge yourself.

Disclosure: The author (and his wife) both maintain long positions in ThyssenKrupp, Nucor, ArcelorMittal, Vallourec, Voestalpine, and ETFS Physical Platinum Shares. Positions may change at anytime.

Jason Busch (and Lisa Reisman)

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