Investment themes for the next 5 years

C

Croesus

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With all the turmoil in the markets these days, I'd be interested in hearing where are people putting their money for long-term investment in the stock market? I'm sure a lot of people on this forum (myself included) have sufferd some pain over the past 8 months, but assuming that the current crisis will pass in time, what do you think should we be investing in at present (assuming an investment plan of averaging into the market by regular amounts)?

Obviously, diversification is useful to balance any portfolio (index tracking etc), but if there are significant sectoral investment themes out there, it would be good to be in a position to benefit from those themes over the next few years.

To get the ball rolling, and for what it's worth, my own views at present are that the following could be good areas for growth over the next few years:

1. Alternative Energy (increased public awareness, investment and government subsidies)

2. Emerging Markets (a massive secular trend upwards in these countries to more prosperous consumer-oriented societies)

3. Pharmaceuticals (many of these these are at very low valuations - may be due a comeback given the increased spend likely on healthcare for ageing populations in many Western countries and increased prosperity in emerging countries (also like the fact that Buffet has bought into GlaxoSmithKline recently))

4. Natural Resources (although I think they're likely to pull back a fair bit from their current highs in the short term, scarcity combined with increased demand is likely to drive prices up over the next few years)
 
Good quiestion about prospective investment for the next 5 years, I do focus on emerging stock exchange market, particulary Kazachstan and Russian, there are many companies listed on LSE, Nasdaq and NYSE and all financial reports are available, also I have noticed the Fundamental Analysis definitely works there
 
Do emerging markets (like Kazakstand and Russia) and water not have a significant geopolitical risk as well as potential for nationalisation of key assets? I remember reading somewhere about potential nationalisation of water companies in South America (sorry can't recall reference), especially if global warming increases impact of water shortage (which apparently is happening in the Andes).

If property rights of individuals are not recognised or subject to political interference (clearly seen in the case of Russia), then your 'investment' can easily be degraded or made worthless.

Why would someone feel that emerging markets have more to go, and are not oversold? Buffett, late last year, thought China had very little value on the back of such phenomenal growth in share value in the last number of years. IMO this could equally apply to other BRIC countries.

We are certainly being spun the line that these new markets are not overly reliant on American demand, as they have a burgeoning middle class from their recent prosperity who can take up the slack in any drop in consumer demand from the US - and it will be interesting to see if this is true.
 
qwertyuiop said:
When you say 'hard' what do you mean?
MEtals?

WHy do u think hard commodities are done ?
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metals and energy commodites,

they have been trading above supply/demand suggested prices for some time, due to an infusion of speculative money. EG, OPEC set their supply quotas to maintain a $80 a barrel oil price. Investors are allocating money away from commodites towards lower risk strategies, hence the recent price action ion commodites. Also, with major economies going into recession, a drop in demand is expected.
 
I remember reading somewhere about potential nationalisation of water companies in South America (sorry can't recall reference), especially if global warming increases impact of water shortage (which apparently is happening in the Andes).

Hi Askar,
It looks like you refer to rumours not to the facts, in fact that Warren Buffet invests in undervalued companies and such ones are mush more on emerging markets rather that developed. There are many private companies with good management and financial results in different sectors not just in gas and oil, it is very dificalt to find similar companies on the developed market, that why I do focus at emrging markets
Kind Regards
 
[FONT=&quot]Here’s my two cents worth:
[/FONT]
Croesus said:
1. Alternative Energy (increased public awareness, investment and government subsidies)
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[FONT=&quot]I’d stay away. Government subsidies = rigged markets, so the market will collapse when the subsidy runs out if there are cheaper alternatives available.
[/FONT]
Croesus said:
2. Emerging Markets (a massive secular trend upwards in these countries to more prosperous consumer-oriented societies)
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[FONT=&quot]Yes. But your emerging markets should be South Korea, Brazil, Taiwan, Israel, etc. (i.e export-oriented countries, rather than consumer countries)[/FONT]
Croesus said:
3. Pharmaceuticals (many of these these are at very low valuations
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[FONT=&quot]I don’t think big pharma companies can ever become de facto monopolies the way Inter, Microsoft, SAP or Adobe have, and, in the last analysis, healthcare is paid for by governments and insurance companies who are monopolies or quasi-monopolies, and who want to keep healthcare costs down,. But, you may be right on low valuations at present, but more for a short term value play.
[/FONT]
Croesus said:
[FONT=&quot]4. Natural Resources[/FONT]
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[FONT=&quot]I[/FONT]’ve gone for soft commodities, and I’d forget about water, as there’s a limit to the upside. Governments may let their citizens go dirty, but they won’t let their citizens go thirsty.

Two I’d consider:

1.Timber. It’s both a commodity and a property / land play. Check this out: [broken link removed]
[FONT=&quot]All we need is an ETF based on the VIX (do such things exist?) and then re-allocate some of your S&P / foreign developed market equities to it.[/FONT]
 

I don't see much hard data in this thread. Have you some hard data and independent references to support your assertion of value in these markets?

My main point about property rights and geopolitcal risk is not a 'rumour' - but an observation of factual circumstances.

I don't understand your reference to Buffet - except that it wrongly imo implies that Buffett is investing in emerging markets because that it only where he finds value.
 
Hi, Askar
I just have pointed that to find undervalue stoks is much easy for me on emerging market rather that on developed
 
I mentioned on this forum a while back companies that are involved with irrigation equipment and the recent earnings reports from the main companies indicate it is still a high growth area.

BTW are you the Croesus from the Irish Times?
 
croker said:
BTW are you the Croesus from the Irish Times?
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You're thinking of crosaire from teh irish times.

Howvere - what's the name of teh investor guy from teh sunday tribune?
Is it Croesus too ?

Reveal yourself Croesus !!
 
Croker, Qwertyuiop - I was thinking more of the Lydian king than the Irish Times columnist but I wouldn't claim the riches or the investing acumen of either.

Thanks to all on the thread for the investment ideas. I'm inclined to think diversification in approach is worthwhile for these too - maybe choosing four or five sectoral themes and devoting 30% of the overall portfolio to them to possibly give some spice to performance over the next few years...and without losing my shirt if things don't work out for any individual sector.
 
You're thinking of crosaire from teh irish times
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LOL! No there is actually a columnist in the Business supplement of the Irish Times every Friday called Croesus who discusses stocks.
 
To the guys who believe hard commodities are not the way to go. Do you include gold in this? Many articles seem to suggest gold acts independently to other commodities to a certain degree and should always be included as part of a balanced portfolio.
 
mike mac said:
To the guys who believe hard commodities are not the way to go. Do you include gold in this? Many articles seem to suggest gold acts independently to other commodities to a certain degree and should always be included as part of a balanced portfolio.
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Have a look at this graph of the price of gold since the late 70's.

http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx EDIT : need to select Historical Gold charts, then Multiyear 1975-2008.

Notice how it was rangebound for almost 25 years and that it only pops in times of uncertainty, like now. So, unless you think we are in for a prolonged period of uncertainty, I would leave it for the magpies......
 
Thanks markjbloggs. Seeing that the thread is based on themes over 5 years it is probably fair to say that there are better options. However I would also argue that the current period of uncertainty has a bit to go yet and gains in gold will continue.
 
Hey Croesus, good discussion you started here. IMO the investment themes you have sellected were the places to invest 5 years ago. These are certainly still fast growing sectors (Alternative Energy, Emerging Markets, Natural Resources, Pharmaceuticals ) As for investing now given their massive valuations / price increases (exception Pharmaceuticals) I think for long term returns these may have largely run their course.

There is an article below on the FT regarding the long term returns in investing in fast growing ecomonies / sectors verus slow growing...showing because of value...slower growing sectors have preformed better long term!



I feel that the smart money "fast" money has been in these sectors and because of the returns other investers are following wih their "slow" money. Hence there are so may funds available in emerging markets now also a Gold eft has more gold that all bar 3 world central banks...further driving up prices. It may only be a matter of time for the smart / fast money....to cash in their returns and invest else where.

Possible examples of what I'm talking about include.
1. Irish Property Market. Fast growing! However from my experience a few years ago every joe soap was talking about buying an investment property...slow money....while the banks etc were doing sale and lease back deals on their key sites..fast money.
2. Dotcom boom and bust.
3. Japanese stock market late 80's/90's....still 50% ofg their then highs...
4 Eircom...people who sold fast made good money.
5. NTR selling Airtricity....possible one???

So beware of the hype...

Docker
 
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