Before I get on to today’s Money Morning, a quick follow up from yesterday.
In yesterday’s Money Morning I referred to a research report prepared by Morgan Stanley analyst Gerard Minack. At the time we went to press we hadn’t received permission from Mr. Minack to show you the charts.
Normally, if it’s publicly available material on the interweb we’ll just show the image or the quote and provide a link back to the source. But because this material was for Morgan Stanley clients only I wanted to make sure we got permission first.
Just to avoid a potential legal snafu. We don’t like those…
Anyway, shortly after sending you yesterday’s Money Morning, Mr. Minack responded to say we could reproduce his charts, so here they are below…
The first is the chart that shows more than 70% of property investors are losing money on their investments:
And the second chart is even more extraordinary. It shows how the net rent deficit has ballooned from close to breakeven eight years ago to a whopping $8 billion by 2008:
Anyway, we won’t cover all this ground again. You should refer to yesterday’s Money Morning to view the whole article.
But quite frankly, as a fully qualified investment adviser I find it absolutely staggering that property spruikers have been so successful in not only encouraging so many individuals to hock themselves up to the eyeballs in debt, but also to convince them that losing money on an investment is a good thing…
And just remember, we’re not talking small numbers, we’re looking at 1.7 million landlords, where 70% of them are making a consistent loss on their investments.
Quite frankly, the property spruikers should be ashamed of themselves. We’re surprised they’ve been able to get away with it for so long. Anyway, on to today’s Money Morning…
A couple of weeks ago Daily Reckoning and Australian Wealth Gameplan editor Dan Denning wrote about the idea of investing in world dominating companies.
He got the idea from one of our colleagues in the United States, Dan Ferris. There Ferris invests in stocks such as Wal-Mart [NYSE: WMT], Intel [NASDAQ: INTC] and Microsoft [NASDAQ: MSFT].
That got Dan Denning thinking, “Does Australia have world-dominating blue chip franchises with a track record of increasing earnings and dividends like clockwork?”
As we look through our blue-chip watchlist, only a few stocks stick out as potential world dominators: BHP Billiton [ASX: BHP], Rio Tinto [ASX: RIO], and Westfield [ASX: WDC].
Then there’s News Corporation [ASX: NWS], although of course you can’t really count it as an Aussie company anymore. But, it has grown from a small Adelaide based newspaper business to be one of the world’s largest media companies.
Maybe there are others we’ve missed. That’s possible as we only took a quick glance at our list. Drop me a line to moneymorning@moneymorning.com.au or write a comment to the Money Morning website when this article is posted later today if there’s any others you can suggest.
That’s not to say Australian companies don’t have a global presence. They do. But very, very few are what you would call world dominators.
That’s probably not surprising considering the small size of the Australian market. And it’s also due to the comparatively small amount of capital available to companies here against the amount of capital available to companies in the United States.
And that’s the key point, access to capital. It’s the availability of capital through savings and investment that helps to drive an economy. Unfortunately, in the Australian economy, most of that capital goes to… yep, you’ve guessed it, housing.
Look at any bank balance sheet. You’ll see where over half of bank lending goes – to the building industry.
Another argument about why Aussie companies don’t dominate globally is down to the franking credit system. That Australian investors want franking credits on dividends and therefore companies are encouraged to invest and earn locally rather than globally.
Whether that’s true or not we don’t know. But we’re sure there are other reasons why Aussie firms don’t become world dominators.
But funnily enough, and perhaps unexpectedly, despite the lack of world dominators among blue-chip companies, as part of my day job as editor of Australian Small-Cap Investigator I come into contact with more potential world dominators than you’d expect.
However, it was only as I looked back over the stocks we’d tipped since 2007 that I noticed about 8-10% of those stocks could be considered as future world dominating companies.
That includes two out of the five stocks we currently recommend in the Australian Small-Cap Investigator portfolio. Two completely different stocks that have the potential to make big bucks from their chosen industry. And to perhaps become world dominators.
I’ve written before about one of the things I look for in stocks, and that’s the idea of creative destruction. That’s where a brand new technology or way of approaching the market changes the behaviour of consumers.
A classic example is the world of music. A couple of hundred years ago the only way to enjoy music was to go to a concert or have musicians visit you and play live.
Then the invention of the gramophone meant that people didn’t have to go to a concert and they didn’t have to pay for the cost of hiring a string quartet. That was followed by the record player and vinyl records.
After that came cassette players, compact discs and now MP3 players.
At each stage the evolution of listening to music has resulted in improved quality and lower costs. Price deflation if you like. Yet that price deflation and technological development hasn’t caused the economy to crash and it hasn’t led to mass unemployment.
In fact it’s done the opposite.
That’s what technological innovation does for an economy.
And researching small-cap stocks every day I come across of a bunch of great little stocks that have the potential to not only make a few bucks from their idea, but which have the potential to become world dominators.
Let me give you a couple of examples. But before I do, just remember that neither of the stocks I’m about to mention are current tips in the Australian Small-Cap Investigator advisory service.
And I’m not giving them to you as stock recommendations today.
The first example is a company called Tissue Therapies [ASX: TIS], I tipped this stock in January 2009 at 15 cents per share, but our trailing stop order was triggered at the same price just a few months ago.
Between those dates the share price had been all over the place. Much as you’d expect from a very, very speculative stock. In fact it was so speculative that it was our first Radioactive stock pick.
Radioactive stocks were those I deemed to be much too risky for even the most risk-hungry small-cap investor.
Anyway, as you’d expect we hoped to have achieved a better return than we did. And maybe one day we’ll recommend it again.
But here’s the reason why we tipped it and why it could become a world dominator. Tissue Therapies has developed a wound treatment product – called VitroGro – that has produced some amazing results.
How amazing? Look, I’m not going to show you the pictures because it’s not a pretty sight. But what you’re looking at is a treatment that under clinical testing has reduced the size of injuries such as venous ulcer wounds by 50%, 60% or 80% in the space of just a few weeks.
Why is that amazing? Simply because these tests were carried out on patients who had previously undergone treatment using other methods for years without any reduction in the wound size at all.
So bad were some of the wounds – many were elderly people – that many of them had considered amputations due to the pain and the social exclusion that these wounds cause. Sorry to be graphic, but if you’ve ever smelled a venous ulcer wound then you’ll know what I’m talking about – hence the social exclusion.
If you’re in any doubt about how terrible these venous ulcers are, just look at the Tissue Therapies website and download one of their clinical updates – try not to view it around lunchtime though, it could put you off your toasted cheese sandwich!
Anyway, the point is, that this is a product that if it gains all the regulatory approvals could gain the lion’s share of what is more than a $4 billion – and growing – global market for wound treatment.
It has the potential to be an Aussie world dominator. Trouble is, these things don’t happen overnight. When it comes to medical approvals companies have to jump through hoops of fire in order to pass all the tests.
Even a product as great as VitroGro – based on clinical tests – still probably has a long way to go before it gets near to marketing and selling the product.
That’s just one example of a potential Aussie world dominator. A potential world dominator that’s trading at a market capitalisation of just $27 million.
But there are plenty of other examples. Such as Dyesol Ltd [ASX: DYE]. This is a stock we tipped in March 2007 at 64 cents and then sold when our trailing stop was triggered in November last year for 95 cents.
Overall that was a gain of 48.44%. That’s not a bad return. But again, there’s the potential for much bigger gains.
It may surprise you to know that Dyesol is involved in the solar energy industry. Yes I know, you’ve read what I’ve written about solar power. Something about it being the biggest waste of money in the history of mankind.
Something like that anyway.
But what Dyesol is doing is different. And it could revolutionise the way people think about solar power. I mean, if I say to you “solar power” right now, what are you thinking?
Odds are you’re thinking about a great big slab of solar cells being stuck to your roof. Or maybe you’re thinking about acres of ‘follow-the-sun’ solar panels stuck in the middle of the Australian outback.
Well, how about solar cells that are built into the “skin” of a building? That’s something you probably didn’t think of, right?
But that’s exactly what Dyesol is developing at the moment with UK steel company Corus – formerly known as British Steel.
If this project reaches commercial viability then you’re looking at entire buildings becoming solar panels. It could mean that every new north facing wall and every roof in Australia could become an inbuilt solar panel generating electricity for homes and industry.
But look, that’s not going to happen overnight. And right now it’s not a stock we’re prepared to tip. But it is a home-grown Aussie company valued at just $124 million. And it does have the potential to do big things if it can prove the concept to investors and potential customers.
As you can see, that’s just two of the stocks I’ve plucked from the list of our ex stock tips. There are plenty more. There are plenty of others that we’ve tipped and plenty of others that are on our watchlist to tip.
And, we dare say there are more that we haven’t even thought of or found yet.
The point is, despite there only being a small number of true world dominators on the Australian market, there are a surprisingly large number of small-cap stocks that do have the potential to make it to the big time.
One of those potential dominators is a stock in the Australian Small-Cap Investigator portfolio that has doubled in just the last eight weeks!
But whether those small would-be world dominators remain Australian or whether they get taken over by bigger fish from overseas doesn’t matter. What matters is that despite the lack of capital available to Australian innovators there is still the will and the entrepreneurialism to take small ideas and try to build them into big ideas and big profits.
It’s part of what makes the high risk world of Australian small-cap investing so interesting, exciting, and potentially, so profitable.
Cheers.
Kris Sayce
For Money Morning Australia
{ 26 comments }
← Previous Comments
Next Comments →
Sandra, you are a silver bug, so this would probably interest you:
SILVER: 1 to 1 Parity With Gold – Web Bot Research PART 1
http://www.youtube.com/watch?v=poUMNoN5VhI&feature=player_embedded
And a few more, besides. So, the questions are whether they did say these things, and if so, why would they say it?
- “We shall have World Government. Whether or not we like it. The only Question is whether World Government will be achieved by conquest or consent.”
- “We can’t be so fixated on our desire to preserve the rights of ordinary Americans”
- “We are on the verge of a Global transformation. All we need is the right major crisis and the nations will accept the New World Order.”
- “”We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world – no longer a Government of free opinion, no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men.” – Woodrow Wilson [U.S. President during World War I]
- “Every time we do something, you tell me America will do this and will do that . . . I want to tell you something very clear: Don’t worry about American pressure on Israel . We, the Jewish people, control America , and the Americans know it.”
Conspiracy Nuts and Conspiracy Theories
http://www.tentmaker.org/Quotes/conspiracy_%20nuts_theories.htm
cb..@7.. nothing new to me sir. I was of the understanding that Kissinger was due to go on trial on the day the planes hit the twin towers…. I think it was a little green man that told me that one???
The timing is not so important. More to the point, are you prepared for whenever it hits. Whatever IT is IT won’t be pretty.
Can anyone answer me why they have a massive underground storage facility in a Greenland mountain, (or in that region) were they have been storing every seed of every plant and food crop known to man. Including some 20 plus varieties of wheat?
I can’t find a link to it but it was a news story on 60 Minutes about two years ago, stating it has been in existence for a decade or so.
Ah!!! aren’t kids clever!!! All one needs to do is ask and BINGO !!! its in your hands.
here is the link to “the Doomsday Vault”..
http://www.independent.co.uk/news/world/europe/norways-doomsday-vault-holds-seeds-of-survival-786773.html
Nick – Yes, I remember seeing the seed hunter, who found a hardy, ancient variety of chick pea in that program. Same one you refer to, I assume.
“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost 40 years……It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supernational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries.”
http://www.quoty.org/quote/46
But don’t believe your lying eyes, folks. Just move along, Nothing to see here.
Read my keyboard cb…”See – no hatred, no bitterness, no flying saucers or bloody conspiracies.”
…by the way, has anybody seen Peter Garret or Penny Wong?
Nick – Nope, which is not surprising, given that these two could not sell water in the desert with the electorate. But they are going to come out of the woodwork and will be all over us like a rash with their environmental and climate control programs, if Labor gets back in. I was just thinking about the hubris of it all: Man has no chance in hell of controlling the tides or the weather, and these shonks are trying to sell the population on them being able to control the climate. What hubris, and how moronic!!!
Incidentally, Nick, that lecture by Joan Veon gave a rather eye opening perspective on the slow process of how World Government has been established over the decades. According to that framework, what they are trying to do next is to establish a world wide tax regime to fund this NWO World Government. And so we see how carbon taxes and carbon trading would fill that space for the Machine. So, given the money and influence behind it, they are probably going to get it, one way or another. They always get what’s coming to them.
cb..@19…precisely. this is why my emphasis is how to buckle down for the wild ride ahead. Technical’s mean nothing. Just a toy to keep the babies occupied.
Real wealth is being stripped from the masses who are being groomed for “serfdom”. The people are being cooked slowly, so as to not create “commotion”. Should they wake up too soon, they will throw “an event” our way just to take our mind off things. THIS is my concern as a father, as these “events” always cost lives.
It can come from a vast number of quarters, but rule of thumb is “first create the problem, then offer the solution”. We will all follow blindly and thank them for “helping” us.
Look at how many people are “thankful” for the $900 stimulus. Talk about “moronic”. It’s their money for God’s sake! Not a freeby! It will be taken from them (with interest) in one way or another.
So imagine when they have lost everything and a bowl of food is offered to them. They will be kissing the feet of their new “landlords”.
← Previous Comments
Next Comments →
Comments on this entry are closed.