Feng Shui or Fundamental Analysis? Seven Ways to Profit From Either Strategy

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By Jennifer Yousfi
Managing Editor

One of China's most important traditional holidays, the Lunar New Year, begins today (Thursday) and millions will be celebrating the first few days of the Year of the Rat. China's bourses will be closed today and tomorrow (Friday) in honor of the holiday, providing investors who usually only follow the markets some time to follow the traditional arts and ponder the forecasts of the feng shui masters. 

“The rat will become aggressive at the tail end of the year and its underlying water element will cool the stock market,” Vincent Koh, a feng shui master at Singapore Feng Shui Centre, told Reuters.

Wall Street might be quick to dismiss such a prognostication out of hand. After all, it doesn't take a feng shui master to appreciate the recent dips and volatility in the

global markets.

But after months of disheartening sell-offs, spirit-depleting whipsaw trading, and one lousy economic report after another, perhaps U.S. investors are ready for a new form of forecasting.

Remember that big run-up in gold prices last year?

Feng shui masters predicted it, as Feb. 18, 2007 marked the beginning of the Year of the Golden Boar, which was supposed to bode well for gold investments. The price of spot gold soared more than 25% last year.

Perhaps there's something to this, after all?

Feng shui is the traditional Chinese practice of combining the study of astronomy with the placement of objects such as furniture to optimize the flow of Qi, which is the positive energy or life force found in all things. There are many practitioners in China, who believe the practice can help improve relationships, foster good health and even help to accrue wealth.    

But while there are many feng-shui faithful working in China's various industries, most are candid about the practice's limitations. Chief Executive Terence Tea, head of copper recycling firm Advance SCT Ltd., makes sure he gets the approval of a feng shui master on blueprints for all new company projects prior to beginning construction, but he recognizes it takes more than feng shui alone to get ahead. 

"I think feng shui has helped my business, but being hardworking is fundamental," Tea said in an interview with Reuters.

Still, there are many who follow feng shui teachings when making business decisions.  Raymond Lo, a Hong Kong-based feng shui master, does readings for corporations.  Today [Feb. 7, 2008} marks the beginning of the Year of the Earth Rat. Therefore, he expects industries linked to earth and metal to prosper in the coming year.

“The rat is a symbol of money to the earth industry... Strong water element in the year indicates productivity and strong activity in the metal industries,” Lo told Reuters,suggesting property, mining and gold investments in the New Year.

Make Money from the Earth

Here at Money Morning, we tend to favor strong fundamentals over feng shui when picking stocks, but if you're looking to make a play based on traditional Chinese principles, there are several investments that fit both schools of thought.

The U.S. property market has had a rough year, but there are still a few bright spots in a mostly muddied market. D.R. Horton Inc. (DHI) and Beazer Homes USA, Inc. (BZH) are two homebuilder stocks that tend to jump out early and begin their recovery in advance of any turnaround in the U.S. housing market.

Plum Creek Timber Co. Inc. (PCL), the largest timber owner in the world, certainly reaps its profits from the land, but it doesn't hurt that the company has “rock-solid” financials, and a very good management team at the helm.

For mining, look to Rio Tinto PLC (RTP) and BHP Billiton Ltd. (BHP), two of the world's largest mining operations. Both firms have skilled management teams and offer engineering savvy. Of course, those two companies have been involved in a nasty spat stemming from BHP's efforts to buyout of Rio Tinto. Perhaps the management teams of the two companies should obtain a feng shui master to eradicate the bad blood that exists between them - although the buyout deal could end up rewarding patient Rio Tinto shareholders. [For another story in today's issue about Rio Tinto and BHP Billiton, please click here.]

To capitalize on gold, a solid play is the StreetTracks Gold Trust ETF (GLD), which offers bullion-based pricing without the hassle of storage or liability of delivery.

And if you want to combine two of the feng shui suggestions for the year – gold and mining – in one investment, consider Toronto-based gold-mining company Barrick Gold Corp. (ABX). Share prices for the largest global gold producer performed about in line with gold itself during 2007.

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