Are equity investments like buses?

"The bull market is built on sand"  emptyend 18 March 2010

Sandcastles in the sky?

To answer the thread literally:
I feel equity investments are more like traffic jams when you always want to be in the lane thats moving faster.(Micro environment).
In truth the whole area is grid locked and not actually moving very fast (macro enviroment)due to overall system constraints and cant go any faster.

The same feeling could be had by deciding you are on the wrong bus and not knowing when to jump off and ride another, will your bus speed up as soon as you step off?

I live in the country and love the fact that I avoid busses and traffic jams. The busses we do have here are infrequent (none existent in places) but they do move faster.

This thread and some of the other LTBH threads on here strike me as a desire to avoid the daily commute and aggravation that comes with it,but still make some money.
This particular bus is the "mental " one of the least painful and most reliable  route to individual security/financial independance.

Would people stop using Investment busses if they were financially independant-or could they just not resist staying out of the game?

Saying that theres 2ft of snow outside so there are no trains,busses,and very few private cars moving.

FH

I'm currently looking for big investment trusts for my father who is looking for a set of buy-and-hold alternatives to an annuity. I was interested in a Fool article published today that covers several here:

http://www.fool.co.uk/news/investing/2010/11/29/invest-alongside-the-really-rich.aspx

The relevance to this thread is that apparently Hansa Trust has 45% of its money in Oceans Wilson, and trades at a 18% discount to NAV.

I wonder if we can find anything that holds Hansa Trust at a 20% discount :-)

It wouldn't surprise me at all if their head office didn't appear exactly blue chip

You can judge for yourself by looking at Google Maps streetview - it is near the east end of Rivington Street, on the south side just west of the railway bridge....attractive looking "window box" on the west wall ;-)  [better than I remembered it though.....]

Interesting comments on revenue rates etc. Thanks again for mentioning it (and apologies to SM whom I note probably found it even earlier - albeit perhaps a tad too early]

ee

On the subject of Avanti Comms, the management have always struck me as being on the way to being wide boys who got lucky, particularly given their participation in the collapse of Avanti Screenmedia a few years ago. It wouldn't surprise me at all if their head office didn't appear exactly blue chip. IMO they aren't shy of marketing themselves, or their news or potential. I expect a blast of positive talk and media coverage with their results on Wednesday, which might well help the SP.

Only a small fraction of the capacity of Hylas-1, the first satellite now in orbit, has been sold. That fraction has been sold at rates some way below industry averages, because the main operators have redundant capacity on many other satellites, guaranteeing service, whilst Avanti didn't yet have even one satellite in orbit. It would be reasonable to expect the rest of Hylas-1 capacity to be sold (taking a couple of years??) at rates some way higher than the rates that have been achieved so far, and how much higher is IMO the issue that'll drive the SP in 2011. On Wednesday the key issue I'll be looking out for is extent of sales achieved so far, and indicators of the rates they'll achieve in future. Anyway, any more Avanti discussion should be on their separate thread, I just thought the initial idea had a place here.

If you're after companies with long term defensible strategic advantages, I offer you Avanti Communications.

Legal right to up to about 12 more satellites (a legally-defensible "moat" to those who like such concepts), each of which would have a comfortable positive NPV and which can be funded by pre-sales to the ultimate users once Avanti has the credibility of last Friday's launch. Strategically, the only problem I suppose is that satellites will one day be made obsolete by ground fibre optic cable, but that day's a long way off. Nice positive broker notes and results on Wednesday.  http://www.avantiplc.com/news/press-coverage/avanti-communications-%E2%80%9C-countdown-lift-hylas-1-%E2%80%9C-strong-buy-base-case-target-pri

French Defence stocks? EADS. Thales?

I'd personally go for the largest European defence manufacturer myself (BAE systems) than the European offerings. Failing that a US one, such as General Dynamics, Lockheed.

Don't see much benefit to holding European defence companies given how wooly European countries are when it comes to paying their way in the defence arena.

Returning to the macro issues for a moment, I find it quite surprising that the markets are firm again this morning (up 50 FTSE points to nearly 5720. In the macro background at present we have:

• tension on the Korean peninsula - so serious that even the Chinese are sounding worried and calling for an emergency meeting
• the €85bn Irish bailout and continued Eurozone speculation over Portugal and Spain
• UK house prices falling for the 5th month running as demand falls
• the Wikileaks revelations, indicating that many of the US's Middle East allies are in favour of bombing Iran and....
• the "big freeze" in the UK, hampering economic activity on the eastern side of the country for the next few days (apart from body repair shops, I imagine)

None of this looks particularly bullish to me, either from a UK perspective or from a global one. Perhaps the markets are enjoying a relief rally now that Wagner has been booted out of X-Factor and England have saved the first test with some astonishing batting (517 for 1....I mean...when was the last time?? ;-))?

It all feels to me as if the markets are slowly getting undermined from a fundamental standpoint, even if perhaps year-end effects may encourage a "steady as she goes" feeling amongst institutions keen to keep mark-to-market valuations up as the books are closing.

ee

"Wouldn't Big Pharma, say Glaxosmithkline (LON:GSK) or Astrazeneca (LON:AZN), be the equivalent of a fund in that you get a portfolio of potential future products (and an historic cash flow to fund the research with a bit left over for dividends)?"

Surely Big Pharma has limited growth prospects (patent expiries) though sort of attractive valuation metrics, and so is a quite different prospect from Small Biotech which has v attractive growth prospects (if you can choose the right one) but silly valuations in conventional terms?

Following the themes of biotech and shovels at the gold rush, I regard the equivalent of shovels in biotech as being diagnostics - the gold rush is the emerging market of personalised medecine. The regulators are increasingly requiring pharmas to accompany their drug development projects with the development of a diagnostic to identify those people for whom the drug is suited - until recently, drugs from a patient standpoint were more akin to shooting with a shotgun than a rifle, resulting in huge amounts of money being wasted on prescribing drugs which will never work and in some cases actually damaging the patient. The genome map provides the data to enable diagnostics to be developed which address these latter issues. The attraction then is that pharmas pay diagnostic companies to develop the diagnostic to accompany new drugs - investors in the diagnostic companies thus not only avoid the cost of lengthy clinical trials but are able to see their companies generating income and profit, whilst knowing that if the drug development proves successful there are likely to be substantial income in years to come from the supply of the accompanying diagnostic - this provides a revenue model akin to the early days of telcos.

I appreciate the problem referred to in earlier comments of how to navigate through this very complex piece of jungle. My experience has been to use the traditional compass of people ie find a person who i) knows his way around this piece of jungle extremely well from an operational standpoint, ii) has the genetic skills required to make money, and iii) is trustworthy - sounds a tall order, but an investor needs access to only a few such people to make life very enjoyable!

If people think that O&G is difficult, or small cap mining explo stories, then they are in for a rude awakening when it comes to Biotec.

Looking at the survivorship rate for compounds progressing through to even Phase III trials, let alone making it onto the market, you are going to haveto be incredibly lucky. Wildcat doesnt even come close to it. As fr trying to understand the biological/chemical interactions, effects etc, I wouldnt have a clue even if I started researching now and kept going for 10 years.

I know Im talking my own book but if you have to consider biotec or even something well outside your own field of comfort, most investors would be far better served looking at specialist closed end or open end funds - closed end funds when a sector is out of favour or overlooked give an even better entry via a biger NAV discount.

I'm interested to see biotech getting a mention. My only venture into pharma-world so far has been an investment disaster

This sounds familiar.  I was in GW Pharmaceuticals for years and sold about 4 or 5 years ago.  It is just back to the price at which I sold.  GWP is producing drugs from cannibis plants but the regulatory/clinical trial process is expensive and very very slow.

The best play I've seen in the biotech and pharma area is Quintiles www.quintiles.com but unfortuately it is still private. It runs clinical trial services for multiple biotech and pharma companies. It is what I call a Klondike company: the guys that always make money are those selling shovels and running the cat house rather than the gold prospectors.

This thread made me wonder if there is a quoted play that is similar to Quintiles.  This lead me to Icon (ICLR) on Nasdaq.  Doesn't look desparately over-valued and might be worth further research. 

Anyone here know the field or the people?

So finding the next big thing is a challenge, to put it mildly, and I’ll happily sit on the sidelines while you try and find it. After all, there’ll be another major crisis, aka investment opportunity, along in a decade or so … if not before

This isn't a million miles from my own view - but if I  were to wait a decade then I'd be rather more interested in investment classes other than equities. It is very easy to point to the BRIC countries as sources of growth - but there are genuine issues over economic (and social) stability in the medium term - and there are issues over valuations in the shorter term.

I'm interested to see biotech getting a mention. My only venture into pharma-world so far has been an investment disaster, despite looking then (and now) to be quite encouraging technically....so perhaps it is an area I should pay more attention to.

ee

Ideally a great stock pick combines elements of both value and growth – above average growth at below average valuation with little risk is the ideal and, unsurprisingly, is very hard to find most of the time. Failing this many investors settle for a restricted version of the beast – either through value investing, cheap but little growth, or momentum, growth but little in the way of fundamentals to back it up. Both methods work from time to time but both are exposed to turns in the market and are potentially high risk in times of high volatility and uncertainty.

Yet at least twice in the last decade, and at least once in every preceding decade back to the Twenties, there’s been the chance to pick up growth stocks at value levels – in 2000/2001 and 2007/2008. During those periods it was ridiculously easy to purchase such stocks if you had the capital and the mental constitution to do so. This didn’t require any great stock picking skill either – and I ought to know.

As an example OCN was trading at around a third of its current valuation as recently as two years ago. In fact OCN probably didn’t fall in the criteria of cheap with great growth and low risk because a significant part of its investment portfolio was held with Lehmans and only liberated at the last moment, its management is far away and unknown and it has a very odd holding structure. At around the same time you could have bought Weir or Aggreko or PZ Cussons or Halma or Hyder or IG Group any number of other UK domiciled based companies with known managements and global exposure at hugely discounted valuations and little associated uncertainty.

Investing in the BRICs is a popular approach at the moment but the history shows that emerging economies rarely become fully developed without serious problems along the way. Whether the BRIC nations have already escaped this status is impossible to say, but if most other nations had been through the recent turmoil of the developed countries then defaults would already have occurred. We sail on through local turbulence sneering at the "ex-growth West" barely aware of the monsters that lurk in the deeps below us.  If China's ecological problems increase or it's growing middle class starts demanding political representation we may find out what those really look like.  In the meantime Holland hasn't been a world power for over 400 years and is still one of the richest nations on Earth.

So finding the next big thing is a challenge, to put it mildly, and I’ll happily sit on the sidelines while you try and find it. After all, there’ll be another major crisis, aka investment opportunity, along in a decade or so … if not before.

Can I suggest a different tack. As exciting as EMs are, I wonder if the opportunities are now fully priced in for the time being.

Whereas the advances in Biotechnology appear, to my laymans mind, to be truly staggering at present and yet they command little attention. I do wonder if the next Microsoft is sitting there and we aren't looking closely enough for it.
There are lots of potential candidates but I'm afraid I do not know enough to confidently point people in the right direction. I have read good things about Biotime (ticker BTX) in the US and IP Group (ticker IPO) (which appears to be a sort of Investment Trust of University projects in the UK). I would be especially interested as to whether anyone has any opinions of the latter.

On a similar theme, Pharmaceutical companies, have suffered a 20 year bear market as far PE ratios are concerned. We have an aging world population, with increasing wealth for the most populous regions. Several of the big players have patent cliffs to be concerned about, but I think that is more than priced in, and perhaps they are due for a re-rating.

Al.

I think that we are at a fundamental turning point where the future will not be more or less a repeat of the past as has been the case with emergence from recessions for the last few decades. I believe that we face deflation ahead of us - people are going to have to price themselves back into work. One of the less unpredictable areas of growth will be businesses which improve the productivity of their customers, a great example of which is healthcare diagnostics within the MedTech sector, which does provide opportunities to find reasonably valued companies which can be held for the long term in the expectation of achieving significantly above average returns.

As a source of further research, can I recommend a look at Bedlam Asset Management Global fund? As a source of ideas, not necessarily as a place to invest, as they are essentially for institutional investors.

Their global fund is unconstrained, seeking to pick just 50 shares globally (diversified by sector and country) that represent their best view of the top companies offering downside protection with growth/value oppportunities. So largely debt free, free cash flow, visible forward order book, etc, trading at a discount to fair market value. They publish their holdings (and changes in holdings) on their website...

www.bedlamplc.com

They also issue a series of articles giving their take on the macro situation and the read across to equities - entertaining reading.

A couple of examples of their picks. Carlsberg - not for Denmark but because they are now the number one lager brand in Russia, with many value credentials. Also Japan Steel Works - again based on fundamentals but mainly because of their poistioning power in relation to supply of specialist steel for nuclear plants, a sector set to grow massively in the next decade.

It's free, and might spark some ideas for further research.

Its interesting that BRIC optimism is the consensus view on this thread. That might be because discussions on stockopedia are dominated by commodity or energy plays, which makes the website attractive to those who are commodity bulls. I do however get the impression from the FT that its a consensus market view as well. Its not a view I share myself though, as I think its only a question of when, and not if, there will be an economic crisis in China. They have after all set themselves up service a demand from the West that no longer exists. There has been so much over investment, that I find it hard to believe that they can rebalance their economy without suffering a significant amount of pain first.

I think that in order to decide on a long term investment now you have to answer the big macro questions. Are further economic crisis likely? Is this likelihood priced into the market now? I would answer yes, and no to those questions, so I think its best to be risk averse at the moment, and wait for better buying opportunities in the future. The difficulty there is to be patient enough.

unwise,

If we're talking about an industry like the cement industry, which most investors don't come across in their day-to-day lives, in what way is it more difficult or costly to research that for a non-UK market, except for language issues? It's all just internet reading isn't it? You get to know the various useful sites and best sources.

I find that broker research is often more accessible for non-UK markets than in the UK, and I steadily read my way through the sort of stuff in my links in 1of9 on http://www.stockopedia.com/content/emerging-market-investment-thesis-46796/?comment=4#4 and http://www.scribd.com/explore/topics/business?p=0&t=newest and I'm getting up to speed pretty well. To me the key approach to learning about stockpicking in Asian markets is to limit the scope of what I'm trying to achieve to start with, ie I limited myself to Singapore and HK initially so things didn't seem hugely daunting, and I'm branching onward from there. As I see it Asian stockpicking is the future, I'll have to be doing it in 20 years time so I might as well get going on it now. Why buy a tiny tiddler like West China on AIM when you can get into the industry leaders on their home market? As ee writes, there are very few global strategically-advantaged leaders in the UK nowadays, so IMO it's time to move to where they are.

SirL,

I think you misunderstand Ocean Wilsons Hldgs (LON:OCN) - a holding I am very happy with. It is the controlling shareholder of Wilson Sons  and merely a holding company that happens to be quoted in London. Wilson Sons IS Brazilian managed and has been operating for 170 years. Historically, there have been close ties between the UK and Brazil.  If you prefer, you can buy Wilson Sons directly on the Sao Paulo stock exchange, ticker WSON11. The relationship between OCN and Wilson Sons is similar to that between Kalahari Minerals (LON:KAH) and Extract Resources. Besides convenience, another advantage of buying OCN is that the combined value of its holding in Wilson Sons (41.4m shares worth £442.8m) and its investment portfolio, last valued at £161.9m works out at £17.10/share, vs a share price for OCN of £13.00 (at latest market prices & exchange rates). I always like to buy my assets at a discount :0) - though, of course, there is no immediate reason to expect that discount to unwind in the near future.

As a major port and shipping services operator, Wilson Sons should benefit from a growth in trade. In addition, it has recently geared itself up to provide support vessels for the Brazilian offshore oil services industry[edit], by entering a JV with Remolcadores Ultratug Ltda of Chile, to provide offshore supply vessels[/edit]

A dividend currently around 2% from OCN is a nice bonus and, barring big trouble in the Brazilian economy, it should perform nicely over the next 10 years.

As a slight aside, I'll observe that Brazil appears comparatively cheap compared to other BRICs, with its market being on a P/E of around 12, according to the FT. I believe there are a couple of factors driving this:

1. Extraordinarily high local interest rates, currently around 10% (lower now than they used to be!)
2. Fears of inflation in the wake of the recent change of government

In my view, however, these fears are probably overdone. The new incumbent, Dilma Rousseff, is very much a disciple of President Lula and is the "continuity candidate", gaining office with strong support. I have recently communicated with my cousin in Sao Paulo, who is involved in international industrial textiles trading, and he remains optimistic for the future of the Brazilian economy, with natural resources underpinning (not just oil, of course), low labour costs and plentiful labour, and growing global trade connections - China is a major and growing trading partner. There is also a strong entrepreneurial spirit.

I have recently added to my holding of the Ishares Msci Brazil (LON:IBZL) ETF.

Regards,

Mark

The obvious theme is globalisation and companies that will do best over the next decade will be those exploit the trend to expand from a country to global player. They must also operate in markets where margins can't easily be eroded or demand is strong at a global level.

I absolutely agree with Siesta Investor re the point he makes around Brazilian investment with the caveat that the City has been shrewd to establish itself as a prefered listing location for commodity plays. I do expect people to become more discriminating at to which commodities have genuine long term supply problems and money will be lost and made in this space, not the easy pickings of the previous decade.

I am not convinced that Tesco will go on world domination, some engineers have good expertise but G4S is worth a look as security is something the UK is good at. I generally like the theme that that UK companies with international exposure will do well (e.g. Standard Chartered, Unilever), the bedrock of any good portfolio are companies that can churn out 10% + eps growth year after year and the flight to bonds by pensions funds etc has left a lot of these large cap companies trading on lower multiples in London than their international competitors.

I do expect losses in the bond markets as QE keeps inflation alive and the debt crisis plays out, there will be renewed emphais on investments that offer a secure inflation protected return such as infratructure and utilities..

I do like healthcare from a protected margins viewpoint, it was my best sector in the 1990s but a dog over the last 10 years. My most recent purchases are Smith and Nephew (SN) and Consort Medical, neither stock is expensive but both have a lot to prove. I have just made a small investment in Ted Baker (TED) on the basis the company can build its brand internationally

Ocean Wilsons Holdings isn't an operating company. It's a Bermudan investment company - think of it as an investment trust with a seriously concentrated portfolio.

Roughly 75% of its NAV is represented by its majority shareholding (58%) in the Brazilian port & shipping company, Wilson, Sons.

The rest of Ocean Wilsons is an internationally diversified investment portfolio, mostly in managed funds.

The shares traditionally trade at around 25% discount to NAV. Effectively you pay for the Wilson, Sons shares and get the portfolio as a bonus on top.

If you want to keep it simple for the next ten years.

Siesta touched on it TESCO.

Good question ee, as ever. Yes there is always a bus coming along but many of them are going the wrong way.

Now I am speaking as a D quartile performer in my Stockopedia Fund. But I have made a 15.5% annualised return since June 2001 in my real equity portfolio. I'm catching the wrong buses at present but overall I seem to have been going the right way (East?). The following are buses I'm considering catching (or in some cases have already boarded):

BUS ONE: Britain has a history. The emerging world has a future.

This is the BRIC story. Sure they are going to make money. But there is an old saying in the private equity world that "good deals don't flow". If there is a great investment proposition in Brazil then there will be a wealthy Brazilian there to fund it. So if the deal turns up in London then most sophisticated Brazilians will have turned it down already (remember the South American railway stocks?). So how do we get a piece of the action?

There are two ways: (i) you buy into a fund where the managers have been present in these territories for a long time (since before the glory story) and are embedded enough to be (almost) local; and/or (ii) you invest in Western companies that have invested in the BRIC markets and stand to gain from the increasing strength of the Eastern consumer.

This leads me to the following possibilities (but I leave it to the reader to decide whether the entry price is right!)

(i) funds

JPMorgan Indian Investment Trust (LON:JII) (mentioned by posters above) JP Morgan Investment Trust have a long track record in India. The existing team have been there since 1999. To second guess them you would have to move there. The performance fee set up is sensible: total fees in 2009 were 0.78% of assets. It is trading today at around 9% discount to fully diluted NAV.

Ishares Ftse Xinhua 25 (LON:FXC) . This is a simple ETF. It invests in the the top 25 companies in the Hang Seng index that have a majority of their business in mainland China. They have been going for six years but, assuming they are sticking to the knitting, they don't need to be Einstein to manage this concept. The other aspect is that the HK market is (relatively) well regulated. Fees are around 0.74%

Aberdeen Asian Smaller (LON:AAS) . Aberdeen Asian Smaller Companies IT. Aberdeen have been investing in Asia since 1987. AAS is focused on Asian smaller companies. The idea is that these businesses live off the wider Asian growth story but with market capitalisations of less than $750m have scope to grow faster than the region. The management fee is 1.2%. It is trading today at around 7% discount to fully diluted NAV.

(ii) Western companies exploiting emerging markets

The choice here is wide. CLSA (Credit Lyonnais Securities Asia) at http://seekingalpha.com/article/165926-china-s-top-100-consumer-brands published the top 100 Chinese consumer brands. It is quite small print but I don't see a single UK brand in this list but other European and US companies have listings in London or US. The top ten Western brands are (in order) Nokia (surprising as Apple is 77th), Coke, Carrefour, Canon, Adidas, Wal-Mart, Pepsi, Nike, Sony and Sprite. Note that Audi-VW, who sell more cars in China than in Germany, are 57th.

UK companies that have a story in China include Rolls Royce Group (LON:RR.) (but wait until the flak about the Trent engine dies down?), Tesco (LON:TSCO) and Burberry Group (LON:BRBY) . I guess there are several others but I've never had much luck with consumer businesses so I don't really follow them.

BUS TWO: Financial and Economic Fragility

Perhaps the real thought behind ee's post is that we are all destined to get poorer because nothing looks very savoury in these days of dodgy banks, sovereign debt, balance sheet recession etc. But it is an ill wind. You could buy a house in Germany at the height of the Weimar inflation for a month's wages (if you were paid in England). However it needed cojones.

I suggest you can lay out your stall best by adopting the maxim that the strong will have a better chance of remaining strong. This means (i) inner core European sovereign bonds (ideally German bunds) as the inner core will convert back to Deutche Marks if/when they abandon the outer doughnut countries to relieve the pressure on the Euro; and (ii) strong, low/no debt businesses in bread and butter areas (non cyclical).

(i) German Bunds can be bought directly but not easily. There is not an ETF listed in London. Euro bond ETFs seem to make no distinction between euro countries (or maturities) so I would avoid them. An alternative I like is a very small investment trust which is run by an ex Casanoves partner, Peter Spiller, who believes that that the euro is fragile. The trust is Capital Gearing Trust (LON:CGT) , which has a line in German bunds and is configured for a long financial recession. The fees are very modest but the trading is thin and it is priced at a mighty premium to assets.

(ii) The Strong. This means very strong balance sheets (no debt ideally), unassailable intellectual property, huge franchise, etc. Survival of the fittest. Everyone has a favourite here. Mine at present are: Weir Pumps, Nestle and Novo Nordisk (leader in insulin products in Europe).

Less balance sheet strong but a solid bet in many other ways is Dignity Plc (LON:DTY) , largest quoted funeral director in the UK.

BUS THREE: Population Growth

The world's population will grow from 6 billion to 9 billion by 2050. It was 2.5 billion in 1950. Now Malthus (1798) and the Club of Rome (1972) both predicted disaster from population growth and we are still here. However there seems to be increasing pressure on (i) water resources, (ii) primary resources (oil and mining products) and (iii) agricultural output. In theory these could be an investment themes. But, except for (ii),  I have no found few convincing ways of exploiting these trends.

(i) Water

There are some water companies in the UK not yet bought by the French. But water is not a scarce resource in UK.   A monopoly water position in israel, Nevada or Australia might be more interesting.  Please send suggestions on a postcard.

(ii) Primary resources

Stockopedia is a good source for oil and mining opportunities. I will not teach Grandma to suck eggs.

(iii) Agriculture

Dietary habits are changing as the developing nations want more animal protein etc. Plus there will be 50% more mouths to feed. Then there is the crowding out of food production by use of agricultural land for bio energy. Probably the best investment is to buy a farm where land values are low (Ireland, Portugal?). Also in theory Monsanto (GM seeds) and John Deere should be interesting but Deere trades on 28 years profits and Monsanto 30 years. Deere might make sense as it grew by 45% last year; Monsanto shrank by 10% as its blockbuster weedkiller RoundUp went out of patent. Another possibility is SNOFF, Sino Forest Corporation, traded in Toronto, which manages forests and downstream businesses in China and is managed by expat Chinese out of Vancouver. It is a bit of a punt as you have to rely on directors' valuations of growing trees. Again, better ideas on a postcard please.

BUS FOUR: Anomalies

Some things go out of fashion. The market gets its pricing wrong because supply and demand are out of balance. I can think of a couple of examples:

(i) Investment Trusts. You can buy 100p worth of assets for 80p. Have a look at trustnet.com and search on discounts. Some of these trusts are old and tired and the managers would like to see them wound up so that they can produce son of IT with better management fees. On run off these may produce close to the undiscounted asset value. Candover Investments (LON:CDI) at 720p had 903p of assets at 30 June 2010. It has an issue or two with funding follow on investments where they have made commitments but it may be worth a look as a potential anomaly.

(ii) Thinly traded corporate bonds. Now do you mind them being thinly traded if you intend to hold them to maturity? Consider CPBA Co-operative Bank 5.5555% Perpetual Subordinated Bonds. They are callable (by Co-op Bank) at par in 2015 (so they may not be perpetual). They are traded at 87p (par is £1). The running yield is 6.33%. If they are called the yield to redemption is 9.4%. The Co-op inherited these when they bought Britannia Building Society. If they don't call them then they revert to 2.05% (from memory) over LIBOR in perpetuity which might not be too bad after 2015 when inflation has kicked in. I'd say it is 90% certain they will be called. The Co-op Bank seems to be a conservative outfit.

This is just one example: go to http://www.collins-stewart.com/ServicesProducts/FixedInterest.asp to explore some other anomalies.

------

I wouldn't want the above to give you the impression that I am a raging Bull.  I am very very cautious at present. But you can't plan for the world to collapse - even at 10% unemployment 90% of the economy is still is going.  Pumps keep pumping and cremations keep happening at much the same rate.

And anyway in the long run we are all dead (but the buses will still leave much as usual).

If you're a believer in the growth of the emerging economy and consumer/infrastructure - not just asian but also the african story then one easy solution may be the CF JM Finn global Opportunities fund.

Its a smallish fund but very focussed on this very area. That's its whole raison d'etre. Not just commodities but also things like ports, storage tank manufacturers, consumer plays and the like. A very good fund manager in John Eaton and well worth a look I'd say.

Sir L,

I agree, lots of talk about the emerging markets but the fact is that most investors aren't willing to/able to deal in these markets. Picking one company out of thousands is somewhat difficult and so most investors would probably be better served with the specialist fund approach - country, regional or themeatic.

I'd love to get a proper discussion going on these companies but, even in the case of O&G, it seems that no one is really that willing to step out of the UK comfort zone despite the very wide range of very successful companies out there - not just E&P but specialist service companies etc. Heck, even tmf fails in that respect. Look at the recent attempts to highlight Niko and Rocksource.

Sorry, bit of a otish rant there. I'll try to contribute to the threqad better tomorrow or next couple of days.

D

Hi sirl,

If you want to invest in ports and transport logistics with an emphasis on Brasil, why not just find a Brasil-quoted ports and logistics company? 

Because of the logistical (for me, and I suspect most S'pedia investors) difficulties/risks in so doing. Apart from finding a broker to handle / hold the investment, I'd have to bring myself up to speed on the nuances of Brazilian stock-market customs and practices.

I doubt Ocean Wilsons management is any higher quality than Brasilian company management.

I have no particular view on the matter (certainly haven't tried to undertake a meaningful comparison), but work on the basis that it's better to back an avge co in the right sector (s) than a great co in the wrong one(s)......and I think the thread is about identifying the future 'right sectors' , non ?

No idea why the Soco link, btw, hopefully some wiser soul (bus) will be along shortly !

ATB

Ocean Wilsons Holdings sounds a rather roundabout way of investing in what you want to invest in. If you want to invest in ports and transport logistics with an emphasis on Brasil, why not just find a Brasil-quoted ports and logistics company? I accept there are obvious arguments in favour of large blue-chip-managed UK- or US companies operating in those areas, but I doubt Ocean Wilsons management is any higher quality than Brasilian company management.

What's this discussion got to do with Soco, by the way?  Why's it tagged as Soco?

Hi all,

Great thread - thanks, ee !

On the California gold miner principle (more fortunes were made by the suppliers than by the miners....altho some 'gold-diggers' reportedly did well ;>), what about something like Ocean Wilsons Hldgs (LON:OCN) , a long-established , originally Scots conglomerate principally focussed on port and transport logistics throughout S America, with an emphasis on Brazil ?

Currently trading at around GBP 13 agst a NAV of GBP 17 or so, with currency risk largely mitigated , yet exposure to a key sector in emerging market development .

The short answer to ee's question is Asian and emerging market investing, where economies are healthy. Admittedly equity valuations are high, but then they seem to be consistently so. The way to do it is either via collective investments or, if you're prepared to put the time in, individual companies. People periodically ask ee's question, I periodically answer this same answer, but no-one seems interested to actually get stuck into researching companies.

I don't believe in the "small miners where there are about to enter production/or currently 12-24 months away, specifically focusing on gold" concept any longer. I got stung on a whole bunch of small gold would-be-producers a couple of years ago - the common problem is that actual production at the levels promised seems elusive. In theory I got the right concept of small gold producers two or three years ago, but one after another my holdings like Mercator, Serabi, Hambledon, EMED and Kenmare didn't produce the level of production they said they would and collapsed. I'm now very sceptical on the small nearly-producing gold miner concept. Saying you'll produce X ounces of gold a year is very much easier than actually doing it.

At the risk of sounding over simplistic I have had the following thought:

The 90's was the decade of Tech shares
The 2000's has been the decade of commodities
The 2010's could be the decade of Banks?

At the turn of the millenium many commodity shares were languishing on very low ratings, in fact I once read an article on the Fool written by you (EE) circa 1999 on various small cap E&P's. Fast forward to Jan 1st 2010 and all the UK listed banks were hard hit, LBG & RBS practically bombed out. I know I'm cheating a bit as we are nearly 10% through the 2010's but I suspect a basket of all the major UK banks will outperform the FTSE significantly over the decade.

No doubt it will be a bumpy ride!

I personally am positioned in Prefs rather than equity. (Also hold SIA and West china cement HK:2233)

Unwise

Initial thoughts before reading the replies on the thread were:

1) change your £ for something else (soon)
2) basics - food producers (raw), fertilizers (potash), & water (desalination plants - reminder to self - need to look further into this).

Fangorn's already covered some of that though ! ;-)

FWIW, I think explorers (O&G & miners) are going to get seriously wiped out fairly soon, on the assumption of something of a meltdown happening within the 5-10 year timescale, probably sooner rather than later. Current producers will be hit hard also, but less so.

I've done nicely out of the recent 'volatility' on O&G, & still largely invested, but definite move from wildcats to larger producers, (BG being one, where I see considerable scope for growth, limited downside, and of course the never ending T/O rumours - one of my larger stakes now).

I don't regard myself as a particularly ethical investor, but pawn shops, debt collectors, private security firms all likely to do well, but not the sort of thing I would/could invest in, as per gambling (sorry fusieogg!) ;-)

Edit to add:

http://www.bbc.co.uk/news/world-africa-11823146

With largest growth (population growth, assuming nothing else grows!) expected in DRC, and looking at the rest of the map, maybe I'll just hang on to the smaller holdings as is - AEX, DPL, SIA, COV... ;-)   

Many thanks for starting what should be a very interesting thread EE.

In my last year at school a group of us took an interest in horse racing. It wasen't so much the losses that put me off. I found the whole thing very boring, particularily the bookies shop with it's faded decor and smoke filled atmosphere. More recently I've got involved again, but this time betting on the 'bookies'.

When you think about it a betting company is just like a transparent bank. It gets money from lots of people, skims a bit off for itself, pays a bit of tax, and gives the remainder back to (some of) the punters.

A few years ago I had holdings in a few gambling companies, all of which were 'racing' away, when the US brought in legislation that effectively stopped internet gambling in its tracks. SP's dropped like stones and some companies went out of business. It was painful. I cut losses, retaining stakes in William Hill Plc (LON:WMH) and Paddy Power (LON:PAP) . Some time after the previous CEO retired from WMH I sold out, having seen the SP slide, and being warned by an old friend (one of our school gambling circle) who played golf with him that he would be a difficult act to follow.

Now Paddy Power (LON:PAP) is my sole holding and I see it as a LTBH. It has achieved consistent growth in market share and sales, profits, and cash flow over many years. It is particularily competitive in its www presence, very much a market leader. A short while ago it made a major acquisition in Australia which has turned out to be a real 'winner'.

Many governments are liberalising gambling legislation, presumably because they see tax take opportunities. The EU is forcing member stated to open markets that have been previously controlled by monopolies. This, and the increasing growth in www based gambling, is increasing the market potential for betting companies. There is a good 'chance' that the US could repeal its restrictive legislation. Reopening that marketplace will give a significant lift to the sector as a whole and to some 'players' in particular.

The ethics concern me a little because of the addictive nature of gambling for some people, but I don't put it in the same ball park as tobacco, one of the few areas I refuse to touch.

I still find gambling boring but see it as one market sector that, certainly in the medium term, will be lucrative for those investors who can stock pick 'winners'.

hehe yeah I'd agree. Valuations seem pretty high currently. But the growth opportunities are considerable. Due to my limited ability to cover Chinese,Indian and Latam markets in addition to keepign a watchful eye on UK and US ones I thought going via a FM was the best way, with some individual bolt ons myself. FCSS is up 22% odd or so since it's launch- second bite of the cherry to come next year with another fund raising I hear.

Am still holding my large BP (LON:BP.) holding, most purchased in low 300's.

I'm also muddling through some thoughts on agriculture,and how best to take advantage of soft commodity price rises I'm expecting in basic food stuffs - Sarasin Agriculture? Or perhaps M&G Global basics?

Any thoughts on how best to position for rising food prices out of interest?

The big problem is finding the time to evaluate the many opportunities that exist in the global marketplace. Thank god for boards like this - some great pooling of talent that's for sure. Thanks to both yourself EE(for the extensive OILIES related discussions) and others on things like Uranium, Silver,Gold, Uranium etc etc. 

Hi EE,

In relation to your "but I'd be interested to know where people see the longer-term investment opportunities" I think one can't go far wrong with investing in the following, particularly on a 5-10year time horizon:

The lazy man's approach

JPMorgan Indian Investment Trust (LON:JII)
JPM Brazil
Fidelity China Special Situation
Blackrock Commodities (LON:BRCI)

with additional exposure taken selectively through one's own selective stockpicking with companies exposed to these countries.

I'm currently looking again at West China Cement Ltd (LON:WCC), China Food (LON:CFC), China Wonder (LON:CWO), Green Dragon Gas Ltd (LON:GDG) in particular. Not much research into individual Brazilian or Indian Co's currently.

And of course finally, small miners where there are about to enter production/or currently 12-24 months away, specifically focusing on gold and silver(but it's a bonus if there is also some copper,or uranium thrown in). Currently Arian Silver Corp (LON:AGQ) , Regency Mines (LON:RGM), Red Rock Resources (LON:RRR) are my main holdings.

Out East is where I see the future bonanza going forward.And Latin America. As to oil E&P focus, well not much to add to the detailed debate on various threads. I've the usual holdings in Ascent Resources (LON:AST), Aminex (LON:AEX), SOCO International (LON:SIA) , Global Petroleum (LON:GBP), some Leni, some Bpc (LON:BPC), Encore Oil (LON:EO.) , Faroe Petroleum Plc (LON:FPM) and Nautical Petroleum (LON:NPE) .

Currently having a little look at CBM (Coal bed methane) players... but avoiding so called solar/water/wind power focused companies.