Best Trades of 2014

Jan 8, 2015   //   by Profitly   //   Best Trades, Market, Profitly  //  Comments Off on Best Trades of 2014

The year is coming to a close, and it’s always great to look back at some of the best trades on Wall Street. Quartz did a great roundup that we are sharing here:

So that’s what we’re giving you in lieu of sweet, sweet returns.

1. Beef Lattes


Return on the left, underlying asset on the right.(AP Photo/Mike Groll)

That’s not a real thing. But severe droughts in Brazil and the western USdid cut down dramatically on the supply of both coffee and beef. And if you managed not to fall asleep during your Econ 101 lectures, you know that means prices go up! Which is exactly what happened.

Coffee prices spiked earlier this year, forcing chains like Starbucks andDunkin Donuts to pass the hike onto customers. Brazil got some rainthis fall, so the java jump is over. But the much of the American West—until this week, at least—is still a vast, arid expanse (paywall), so cattle herds are still small and prices are high enough to bring back cattle rustling.


2. Billionaire dollar store whimsy

Carl Icahn, corporate takeover specialist, speaks at the Reuters Corporate Reform Summit at the Reut..

Lend me your ear.(Reuters)

Carl Icahn is an activist investors, which means he buys big chunks of public companies, harangues them into making changes and profits on the resultant stock gains. He did just that earlier this year with Family Dollar, announcing in June a 9.4% stake in the low-cost retailer. He proposed that the company put itself up for sale, which it did. That turned into a bidding war between Dollar Tree and Dollar General. As of now, Family Dollar is sitting on an $8.5 billion offer from Dollar Tree, though the matter seems far from settled. But none of that matters for Icahn. His work done when the stock surged, he jumped out of the stock months ago for a reported gain of $200 million.


3. The Almighty Dollar


Might as well just use this stuff.(AP Photo/David Duprey)

The US is doing almost singularly wellamong developed economies. And so is the US dollar among major currencies. So investors are flocking into greenbacks to ride out the storm elsewhere.

As the Federal Reserve winds down its bond-buying program, the European Central Bank is attempting to get its own party started and the Bank of Japan is slamming open its own spigots, helping to make those currencies cheaper and driving the dollar to its most expensive level in five years. In many cases, a strong currency hurts economies because it makes exports more expensive. But it makes imports cheaper for American consumers, who are saving money on cheap gas anyway, so go ahead and buy that house you’ve been eyeing on Snapdeal already!


4. Old World Obligations


Betting against Mario was a poor decision.(Reuters/Ralph Orlowski)

Speaking of the ECB, foreign exchange traders aren’t the only ones trying to get in on the stimulus action. Bond investors have been bidding up European government debt in the hopes that the ECB (or some other investor) will take them off their hands later if Germany actually allows the whole thing to go through. To be sure, not all eurozone debt is the same (looking at you Greece), but it’s been a pretty broadly hot category this year.


5. Chinese Stocks


Thumbs and markets up.(REUTERS/China Daily)

The Shanghai Hong Kong Stock Connect, also known as the “Through Train,” has picked up a few passengers since it left the station last month. It was in the works for a while, but Chinese officials delayed its launchamid the Umbrella Movement protests in Hong Kong. This week’s minor meltdown notwithstanding, they still did pretty well for the year.


But it’s curious that a country’s stock market can be doing so well when its underlying economy seems to be going in the opposite direction. Where’s the money coming from? Like in so many other parts of the Chinese economy, the answer is leverage.

Here’s Quartz’s Gwynn Guildford to explain some of that dissonance:

But if leverage has been around for two years now, why are mainland-listed shares only now rallying? Because the Chinese government has been drumming up enthusiasm for stocks, including in its surprise launch of the Shanghai-Hong Kong Stock Connect—which, so far, has boosted A-shares minimally. It has also encouraged investment in its state-run press.

“The government may be hoping, by engineering a buoyant stock market through words and deeds, companies can raise equity (rather than debt) so the whole economy can de-leverage,” writes Cui, adding that a stock boom also should boost consumption by making people feel richer.