Dear Trident Reader,
2011 has started in Turmoil..... But, will it finish that way?
Investors, particularly Australian investors, had a pretty mediocre year in 2010 with most funds and individual investors lucky to break even. This year is shaping up to be the same, another year of poor returns and underperforming stocks.
However, not all stocks are the same. There are stocks that go up, stocks that go sideways, and stocks that go down. Yes, pretty obvious, I know. US writer, Mark Twain was quite a good investor and when asked about his success, he stated quite simply, "Well, I only ever buy stocks that go up!". Quite the comedian? Well, not really, there are ways to improve your chances of buying stocks that only go up. Some are very simple, some take work.
For example, last year my newsletter returned 78% by using these methods to identify stocks that will go up, rather than down, for the most part.
Here's how my process works, in very simple terms:
I identify economic themes that will determine which economies and which industries are set to do well, in the medium to long term. I identified early in 2010 that the Australian market would do poorly and it did. I have again said the fundamentals of the Australian economy are weak for 2011 and US stocks will again outperform Australian stocks in 2011. A good thing for Australians, as our buying power is so strong right now, if investing in US shares with Australian dollars - US stocks are cheap.
I then identify which companies within the industry and economic themes are the innovation and market leaders in their field.
I apply thorough fundamental analysis on their balance sheets, cash flow and profit and loss statements. In addition, I take a hard look at management and their history of performing well in difficult times.
I then ask the question, does the company not only offer good value, but does it also provide strong earnings growth potential in the short, medium and long term. (GAARP - Growth At A Reasonable Price)
Only then will I know, like Mark Twain, that I'm buying a stock with a good chance of going up.
Sounds all pretty simple, but it's not really. Sometimes it takes many hundreds of hours to find one winner, other times the best stocks are pretty obvious. It is the best stocks that are revealed to our Trident Confidential subscribers each week. Our average stock pick returns 67% in an average of around 18 weeks, based on our current portfolio.
So, where do we see the markets heading right now?
We favour the US market right now, although we are still investing is some great Australian stocks, but they tend to be in niche markets and small to medium in size. We believe that the Australian market will end 2011 in positive territory, but only on the back of a good year on Wall St, not through any dramatic economic lift in Australia.
The US market will do very well in the second half due to the continuation of their economic recovery and an improvement in employment, which we are starting to see right now. The US$ will strengthen as the year goes on despite further attempts by the US Federal Reserve to keep it weak so as to further strengthen US exports.
Currently, markets are caught up with issues in Japan and Libya and to a lesser extent the debt of some European countries, but I see these being short term issues that within the next month will be very much market irrelevant and as you well know you never invest based on short term events, but rather on long term trends.
In Japan, while we see short term disruption caused by the tsunami and the Fukushima Nuclear Plant, in the second half of 2011 we'll see enormous investment into reconstruction that will actually be a positive not only for Japan, but will provide a general lift for world GDP. As for Libya, we are weeks from resolution there, rather than months, and we'll see the oil price slip back well under $100 per barrel soon easing inflationary fears and lifting markets.
I see any current market turmoil as an opportunity to buy stocks cheap and even better, using over valued Australian dollars to do so. I've always believed today's headlines wrap tomorrow's fish and chips.
Right now, I see fabulous opportunities still exist in technology stocks and industrial stocks involved in infrastructure, commmodities and energy (not necessarily the miners themselves), agriculture and specialised construction.
Also, medical innovation and pharmaceuticals will be an exciting sector in the second half of 2011 as economic conditions improve and normalise.
Investing while there is still a degree of uncertainty in the world is an ideal time, before the problems begin to fade and the markets happily move higher. Being ahead of the crowd is not only wise, but it provides you with great returns, as we have been demonstrating year after year since 2005.
Our new Trident Investment website is now up and running at www.TridentInvestment.com.au. This new site features the Trident Global Growth Fund and has the PDS available for download as well as the application to invest. In addition, the site provides readers with a lot of information about the fund, our investing philosophy, methodology and answers to many of the questions you may have about investing in the fund.
Click here to visit Trident Investment - Trident Global Growth Fund
If you have any questions about our new fund, Please call Alicia Hunt on (02) 9241 7959
Kind Regards,
Lance Spicer
Trident Global Growth Fund - Fund Manager
Trident Confidential - Editor
Investment Manager
Trident Investment Management Pty Ltd
ACN: 136 841 426
Authorised Representative no. 339798. Authorised
Representative for Australian Mutual Holdings Ltd
7-9 Tonkin Street, Cronulla, NSW 2230
No comments:
Post a Comment