Pick up any newspaper or read any report and you'll read that the stock market has run too hard and is ahead of the real economy. Is this correct? Yes, it is! But is it any surprise? Seriously?
The stock market is always ahead of the real economy... always!
What's wrong with these people? Haven't they been around long enough to know that the stock market always looks 6 to 12 months into the future. You never buy a stock based on todays' earnings.. always the future earnings. These "economists" really surprise me. No wonder so many fund managers have completely missed this rally with such pessimistic views in abundance.
Look, the reality is the smart money is looking at earnings and economic growth in late 2010 and 2011. You should buy stocks that have real earnings growth potential next year and the year after not get bogged down with what's happening now.
At the moment this recovery seems to be based on two factors:
1) A business driven recovery.
Businesses have trimmed down and become leaner and meaner and are now looking ahead (as investors should) and restocking inventories. When the "revenue increase" kicks in, we are going to see the best managed businesses provide very good earnings and widening operating margins. Unemployment will start to come down once business really is straining to keep up with demand, and not before.
2) A China driven recovery
China is booming again and not off the back of the US consumers (who are currently "hibernating"). China is probably growing at 8-9%pa currently and it's doing it off the back of internal Chinese economic demand. This is great news for Australia, as long as we don't keep annoying them with not allowing them to invest capital in our companies. It's also great news for US companies who are selling the "brands" and products the Chinese middle class want. There are approximately 350 million middle class Chinese that want all the things we westerners have, the other billion are determined to join them. As an investor, I'm tracking down the best Chinese opportunities for the next few years and as Trident Confidential Subscribers know, we have discovered some "pearlers", but I know there are more out there and I'm going to find them - well-managed companies going cheap but with revenue and earnings growth set to soar - that's what I'm after and you should be too.
While everyone is waiting for a correction in the stock market, and it may or may not come, smart investors are tracking down "tomorrow's" winners today and investing in them before the "crowd" finds out. That's the best way to make money in the stock market - beat the crowd.
As an example, last week I wrote to my subscribers and told them of a great little Australian company that has one of the simplest but best medical products in the world today. Fully patented, it currently has no competitors that come close to matching it's innovative product. What's more a global company who is the biggest user of these products has just handed over tens of millions of dollars just for the "right" to use the product.
This company is in such a powerful position that companies are paying for the "opportunity" to buy the product!
A dear friend of mine, we have been exchanging news for the past 20 years, even if under different companies. I thing he has alsways something good to say:
It's been a while since I saw an Australian company and invention with such a massive future. Like so many companies of recent times they are going to announce a capital raising so they can immediately go into full scale global production and in the next few days you'll have an opportunity to buy this stock, before it reaches my 2011/12 earnings based valuation of around $4.00, which is around 210% return from where it is now. However, this could increase, if as I suspect, they announce more deals.
In the weeks and months ahead, you'll be hearing of a relatively new and very exciting Australian medical company becoming a dominant global player. When you see a company like this, you don't pass up the opportunity. As I was saying you invest in the future - not the past - economists and analysts please note.
Trident Press: Press@mail.vresp.com
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