So I have been looking at different sectors , regions and stocks recently to see what could be undervalued and offer a chance to make some decent returns over the next few years. Here’s my current favourites, feel free to chime in with your comments.
Natural gas stocks in the US
Natural gas in the US is trading at 10 year lows. The reasons being is that the US has been flooded with new supply from fracking but the infrastructure is currently insufficient to store and export it and the local power and transportation infrastructure will take time to convert to utilising natural gas more (it’s happening with trucking companies as we speak though). Overseas prices are something like 3X the US domestic market price. So I think an ETF fund or purchasing a bunch of small and big gas providers could offer handsome returns in a few years once the obstacles are dealt with to usage. Natural gas is currently 40% cheaper by unit of energy compared to oil even though natural gas has less energy density than oil. It is also better in terms of pollution with significantly lower levels of NOx, SOx and CO2 produced from burning it. Countries like Germany and Japan need to replace their nuclear power stations, renewables won’t even get close and coal has i’ts problems due to pollution and carbon taxes. vancouversun.com/business/Am … story.html
Vietnam (I have visited Vietnam a few times recently)
It is a resource rich country, large population, relatively hard working, pretty stable politically and infrastructure is improving rapidly and announced a lot of new investments recently. The local currency is shaky at the moment and market not what it was once was but medium to long term should rebound nicely. It also offers a nice alternative to China and is well placed to take advantage of economic growth in Myanmar, Thailand, Laos, Cambodia etc. Huge potential to expand tourism too.
Microsoft
They still make bags of cash and trade at very low PE ratio. They have many successful projects on hand now- Windows 8, Windows Phone, Xbox & Connect. May increase dividend payments which should help stock price too.
I almost forgot about this one. I can see the Phillipines finally getting it’s act together and utilising it’s significant human capital to finally catch up to it’s Asian cousins.
I think Myanmar might be interesting. Reforming democratically and starting to lose its pariah state reputation will increase its economic integration in a dynamic region.
My best return in the mess that was last year was a Japan fund I invested in after the earthquake/tsunami. Around 14% for the year. I think under current conditions, it’s best to invest in the dips. I have an ‘opportunity fund’ set aside for anytime a disaster strikes in an otherwise healthy economy. I’m kicking myself I didn’t invest in Thailand following the floods last year, the values of those equities were hit hard and have recovered well, but I wasn’t in the mood for investing then because I’d taken such a hit from the European debacle.
McDonalds: food prices will continue going up and their crap will be too cheap to pass up.
Lockheed Martin: guns, planes and bombs
[quote=“Charlie Phillips”]I think Myanmar might be interesting. Reforming democratically and starting to lose its pariah state reputation will increase its economic integration in a dynamic region.
My best return in the mess that was last year was a Japan fund I invested in after the earthquake/tsunami. Around 14% for the year. I think under current conditions, it’s best to invest in the dips. I have an ‘opportunity fund’ set aside for anytime a disaster strikes in an otherwise healthy economy. I’m kicking myself I didn’t invest in Thailand following the floods last year, the values of those equities were hit hard and have recovered well, but I wasn’t in the mood for investing then because I’d taken such a hit from the European debacle.
I’m also thinking about Indonesia.
I’m a vulture waiting for an act of God. [/quote]
What funds are you investing in CP? US based or you have local access?
McDonalds: food prices will continue going up and their crap will be too cheap to pass up.
Lockheed Martin: guns, planes and bombs
[quote=“Charlie Phillips”]I think Myanmar might be interesting. Reforming democratically and starting to lose its pariah state reputation will increase its economic integration in a dynamic region.
My best return in the mess that was last year was a Japan fund I invested in after the earthquake/tsunami. Around 14% for the year. I think under current conditions, it’s best to invest in the dips. I have an ‘opportunity fund’ set aside for anytime a disaster strikes in an otherwise healthy economy. I’m kicking myself I didn’t invest in Thailand following the floods last year, the values of those equities were hit hard and have recovered well, but I wasn’t in the mood for investing then because I’d taken such a hit from the European debacle.
I’m also thinking about Indonesia.
I’m a vulture waiting for an act of God. [/quote]
What funds are you investing in CP? US based or you have local access?[/quote]
Mutual funds through my local HSBC account. I’m thinking of opening an account with interactivebrokers.com so I can buy etfs and stocks directly.
How would people invest in Mynmar if they had contacts there? Land/House prices have gone through the roof in the last year. Cement prices are spiking. China is building a highspeed railway to the West Coast, through Myanmar. The next 10 years there could be very dynamic.
An excellent article… stratfor.com/analysis/how-my … t-d-kaplan
How Myanmar Liberates Asia, by Robert D. Kaplan
[quote]Myanmar’s ongoing liberalization and its normalization of relations with the outside world have the possibility of profoundly affecting geopolitics in Asia – and all for the better.
Geographically, Myanmar dominates the Bay of Bengal. It is where the spheres of influence of China and India overlap. Myanmar is also abundant in oil, natural gas, coal, zinc, copper, precious stones, timber and hydropower, with some uranium deposits as well. The prize of the Indo-Pacific region, Myanmar has been locked up by dictatorship for decades, even as the Chinese have been slowly stripping it of natural resources. Think of Myanmar as another Afghanistan in terms of its potential to change a region: a key, geo-strategic puzzle piece ravaged by war and ineffective government that, if only normalized, would unroll trade routes in all directions…[/quote]
I’ve also noted that the Indian government has announced plans to spend billions upgrading the country’s rail infrastructure. I’d be interested to know about companies that supply rail, sleepers, services, locomotives and rolling stock to India.
The problem is… … It’s India. Their government bureaucracy and corruption are legendary.
No doubt India has a better future but you should focus on industries in business friendly areas.
Investing in the downturns is obviously a good strategy that seems to work well in Asia overall, however if you had invested in the downturn in Taiwan since 10 years ago you wouldn’t have got much returns except for in the property market or around the SARS crisis.
[quote=“headhonchoII”]4. The Phillipines
I almost forgot about this one. I can see the Phillipines finally getting it’s act together and utilising it’s significant human capital to finally catch up to it’s Asian cousins.[/quote]
I can’t really see the Philippines getting its act together anytime soon. Far too many Filipinos still believe in the concept of a “designated earner”: one member of the family who goes abroad and sends money back home, while the rest of the clan sit on their asses. It’s a pity because the country has absolutely massive potential. Their poverty is mostly in their own heads, or caused by government disincentives (much like India, in fact). I think you’re right … but not yet.
Myanmar certainly could be interesting, although I haven’t been there (yet) … just a gut feeling. Also Laos.
Indonesia will be a good bet when they’ve finally trashed their entire forest cover and the palm-oil plantations are failing (unsustainable cultivation methods). At that point the country will lose two of its major revenue streams and land will be dirt-cheap for those with the cash and the connections. Indonesian law is not conducive to investment of any kind though and is hostile to foreigners.
As for commodities: my bet is on oil, gas, phosphorus, and indium.
[quote=“finley”][quote=“headhonchoII”]4. The Phillipines
I almost forgot about this one. I can see the Phillipines finally getting it’s act together and utilising it’s significant human capital to finally catch up to it’s Asian cousins.[/quote]
I can’t really see the Philippines getting its act together anytime soon. Far too many Filipinos still believe in the concept of a “designated earner”: one member of the family who goes abroad and sends money back home, while the rest of the clan sit on their asses. It’s a pity because the country has absolutely massive potential. Their poverty is mostly in their own heads, or caused by government disincentives (much like India, in fact). I think you’re right … but not yet.
Myanmar certainly could be interesting, although I haven’t been there (yet) … just a gut feeling. Also Laos.
Indonesia will be a good bet when they’ve finally trashed their entire forest cover and the palm-oil plantations are failing (unsustainable cultivation methods). At that point the country will lose two of its major revenue streams and land will be dirt-cheap for those with the cash and the connections. Indonesian law is not conducive to investment of any kind though and is hostile to foreigners.
As for commodities: my bet is on oil, gas, phosphorus, and indium.[/quote]
Indonesia is already a huge growth story, bit late to the party. So to for Myanmar unless you are a big hotel chain or something!
I keep going back to the Phillipines idea because I’m a great believer in human capital and ‘home is where the heart is’. I think many overseas Filipinos would move home as soon as the economy improved and this could create a virtuous circle. I can see IT service companies growing there like crazy because of Filipinos with fairly good English and friendliness (compared to India for example) and the overseas people moving home with their second languages and experience. So I would say real estate in Phillipines will be a hot commodity and other local economy stocks. I also think tourism could be exploited much more.
mm… not really. Their “growth” is based on the same model as China’s: a yard sale of all their natural resources (oil/gas, forestry products, unsustainable agriculture, mining). They have no secondary or tertiary industry of any importance, and most of the extracted resources are exported. Poverty is still rampant because of archaic laws, especially on property rights. A lot of the shambles left behind by Soekarno still hasn’t been properly cleaned up.
Since Indonesia is a bloody big country and has a habit of invading other peoples’ for resources (again like China), it’s going to be a while before that model fails. But it will fail. History is littered with the wreckage of civilisations attempting to grow by exploitative means. Some well-placed investors will then be able to go in and divide the spoils among themselves (exactly as they did not so long ago, in fact).
If I was going to choose, I’d prefer the Philippines I do like the place, but what puts me off trying anything serious is the horror stories I hear from people (other Filipinos) about being ripped off/cheated/lied to etc. That might be something to do with the way they do business (some business owners treat their employees as cattle) but at this point I don’t have enough cash to flush away on an experiment.
Well Taiwan and China have a whole culture based on ripping off and cheating but that didn’t stop their economic success, to a point.
When I say Indonesia was a huge growth story I mean it is already far up the growth curve, just like you said most of it is based on natural resource extraction that is not very sustainable. I like to look at the human capital in the Phillipines as a more productive option. Actually the Phillipines is a pretty bountiful nation, but it’s resources are controlled by a tiny minority.
Yes, that’s what I meant earlier - they’re rich and they don’t even know it. A lot of land is actually in the hands of ordinary people (well, fairly ordinary). An ex-gf once mentioned to me, in passing, that she has a hectare of farmland. It had been left to her by some family member, and she hadn’t even bothered to do anything with it. She eventually married into a family with about 100ha of land holdings … but they were STILL poor, because they were using outdated farming methods and had made no attempt to invest in their business or improve their access to markets. The underlying problem, I suspect, is that there is no property security. For some reason, nobody ever bothers to transfer title deeds properly (I imagine it’s a tax thing) so a lot of people are settled on land that they don’t legally own, even though they have a de facto right to live/work there. That means, in turn, the the land has no collateral value. The Philippines has good-enough legal institutions, but nobody uses them properly. Everyone’s trying to operate some scam, even though it’s to their advantage to just comply with the law.
Not necessarily. Remember that when you buy property, what you’re actually paying for (mostly) is a set of legal rights, not a physical thing. If you pay more, it’s (usually) because those rights are stronger or more “secure” (likely to persist into the future). Conversely, if you’re paying a bargain-basement price, it’s probably because risk has been factored in: the risk of losing your shirt. Some people like to take a long-shot gamble, just for the lulz, but mostly it’s not a good strategy.
As for investing in general, I’d say it’s better to jump in on the uptick and then bail once you’ve made a modest amount of money. There’s a lot to be said for following the crowd as long as you don’t follow them over the cliff.
If you look at the chatter about the Phillipines now what with the new President etc. you can get the feeling that it is at the start of an uptick. The uptick could turn into a torrent if many people start going back with some capital.
The key to this article is that natural gas demand is going to ramp up in the US to at least double current levels in the next few years, (>200 natural gas plants in construction, only 2 nuclear) the only thing that could prevent that is if coal prices drop. Even then carbon taxes and air pollution laws strongly favour gas.
So when the plants come on line, LPG terminals are ready to export and the slow down in drilling due to depressed prices, natural gas prices will shoot up, probably to 7-8 USD/M3 from 2-3 now (prices in Europe are around 17 USD/M3. This is a great investing opportunity.
Not only that, but nuclear will then see a resurgence in a few years as gas prices increase and the government and power companies realise they shouldn’t put all their eggs in one basket. As many US power companies will be sitting on pre-approved nuclear plants that have passed up to date safety standards, nuclear plants will be built much faster than previously meaning stocks related to supply of nuclear power generating equipment will get a big boost.
In terms of buying property in the Philippines, isn’t it similar to Thailand with foreigners being unable to actually own land (but able to own a flat as long as a certain percentage of the flats in the building are owned by nationals)?
A French friend of mine who is engaged to a Filippina went to the Philippines to inquire about property (he is retired and had wanted to live there). He met enough screwed-over foreign men while there to completely decide against it. He came back with so many horror stories from his short visit that my husband and I couldn’t believe it.
I do like the place, but what puts me off trying anything serious is the horror stories I hear from people (other Filipinos) about being ripped off/cheated/lied to etc. That might be something to do with the 