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me and my money

Chris Foster

Chris Foster, 46 Occupation: commodity trading adviser in Toronto Portfolio: Core position in shares of blue-chip companies such as Bank of Nova Scotia, Atco Ltd. and Manulife Financial Corp.; positions in commodity futures (long on sugar, soybeans and crude oil, as of early October) A veteran futures broker
Mr. Foster started his career as a futures broker in 1989 at Friedberg Mercantile Group in Toronto. While there, he and partner Jeff Kowal developed a trading system based on sentiment indicators. Mr. Foster now applies this approach to managing portfolios of futures for Blackheath Fund Management. He also writes a weekly newsletter, available on the firm's website.

Favourite stock "My favourite stock [in personal portfolio]is Canadian Hydro Developers. What I love about this company is that they have great leverage to higher electricity and energy prices. With a wind utility … an increase in electricity prices can go right to the bottom line, since wind is always free [for other kinds of utilities, higher power prices usually go hand-in-hand with higher input prices] The company has been increasing this leverage by raising their ability to sell power on to the spot market, and not on long-term contracts."

Why he's bullish on oil The rationale behind his long position on crude oil serves as an illustration of his trading system "rooted in behavioural finance principles." Crude oil has been in a fairly solid uptrend since December, 2008, yet two polls of futures traders put the percentage of bulls at less than 40 per cent. "This is the kind of setup that I find very interesting, when the market is going in one direction, and trader sentiment is going in another." He wants to be long when speculators are fighting underlying strength in the market.

Best Move
"In December of 2008, as the financial crisis looked to be taking us into the abyss, I noticed that despite aggressive shorting by futures funds, copper prices were not making new lows. This was a huge bullish divergence in my mind, and prompted me to buy in. By the time I got entirely out of the market late this year, prices had doubled."

Worst Move
"Back in December, 2004, I was sitting on fairly large profits for the month, but saw those profits turn to losses as a wave of liquidation hit the market. I have since realized that the Christmas-New Year's time of year is a very dangerous one, with large price moves happening on very low volume."

Advice
"Work on your stamina." Many investors in futures contracts are incapable of holding positions even for a few weeks, Mr. Foster believes. Holding positions for multimonth terms requires a strong focus on the size of one's position and stop-loss orders.

Special to The Globe and Mail

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