Last week, Twitter stock was up 25% after announcing some very impressive quarterly earnings. I had been buying Twitter since the start of May. Thanks to the awesome power of dollar cost averaging, I was about break-even on the day before the earnings announcement. I sold 40% of my shares covering almost 70% of my original investment, leaving me with 60% of the shares at 30% of the price.
In gambling terms this would be called “playing with the house money”, except that some of it is still my money.
This leaves me with a good problem… cash on the sidelines. I can’t convince myself that having cash doing nothing is a good thing. I try to rationalize it by saying, “Cash is king” and “The market valuations are simply too high right now.” While, I believe both of those things, I have a belief that there should be always a good way to use cash. In this case, the cash is in a retirement brokerage account, so my options are limited to the securities markets.
I’ve never been a big fan of bonds, they’ve never felt like a good fit for my aggressive investing style and relatively young age. So that typically leaves me looking for the best stock opportunity out there. One thing I should note, is that this is a small allocation of my overall portfolio that dedicate to active investing… the overwhelming majority of my money is in very broad-based ETFs. So with this money, I’m looking for a bargain. The approach has been worked for me, but of course I’m aided by a strong macro-economic environment.
Because of that strong macro-economic environment, I don’t see many stocks that I’d consider a bargain. I decided to use an ETF screener to see what has lost money in the past year. ETFs that were invested in Russian have been some of the biggest losers. I’m guilty of not always following current events, but it’s even obvious to me that there are a ton of political issues there.
It got me thinking, “Are things likely to get worse or better? Is Russia going away anytime soon?” Many countries have their ups and downs. Greece notably was in a terrible financial situation a couple of years ago. The GREK Greece ETF has performed really well over the last couple of years.
When I look at the Market Vector Russia ETF Trust (NYSEARCA:RSX), I see it as near its 5 year low. I think to myself, “This clearly is a downtime for the country. At some point, it seems reasonable that they will resolve the conflicts and the dark cloud that has followed them will go away.” If this is true, the economy should recover and I’ll be able to sell at a nice gain.
I talked with a friend who follows all the markets and she made a great point that some economic sanctions have just begun. It might take awhile for them to filter through and the results be seen. In fact, an article a couple of days ago pointed out that some of the Russian ETFs are looking to drop some of their holdings that might be largely affected by the sanctions.
In some ways it is really risky, but in other ways, a whole country’s ETF should carry a lot less volatility and risk than my previous Twitter investment. Let me know what you think in the comments.