Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investing in Australian Stocks for Faster, Asset-Backed Growth

Companies / Austrailia Aug 23, 2013 - 02:02 PM GMT

By: Money_Morning

Companies

Martin Hutchinson writes: I like Australia's stock market right now. I think it provides you with a ton of upside potential.

Virtually every analyst on Wall Street disagrees, of course. They hate Australia. But they didn't like Chile, either, where we're up 46%. And they weren't crazy about Indonesia - another market that's making us good money.


Independent thinking pays well, plain and simple. And right now, Australia can pay you extremely well.

And there's more than one way you can make money.

The broad-based ETF is the no-brainer, of course. Based on the country's economic growth rate, it could increase twice as fast as the S&P 500.

But you can do even better by picking up shares of one (or all three) of Australia's best companies, as you'll see.

This is just a great place to grow your money right now, for three reasons...

1. You Get Faster, Asset-Backed Growth

Australia is projected to grow significantly faster than the United States this year - 2.5% compared to 1.7%. Next year's estimates: 2.9% versus 2.7%.

It's not a blistering 10%, of course. But remember...

Australia has the "commodities edge," too.

Its economy is built on resource demand, from both developed and emerging markets around the globe.

And now that we have signs of a bottom in precious metals, and inevitable price hikes in commodities overall, this is key.

When the Asian engine revs up again, Australia is going to be the prime beneficiary.

Australia has the oil, industrial commodities, and agricultural products that fuel the world - and Asia in particular. When the Eastern engine revs back up, Australia will be the prime beneficiary.

2. You'll Win Either Way in September

Another issue that has kept the Aussie market on hold is that national elections are pending in early September.

Many outsiders are waiting until a party takes power in this closely contested race. But the fact is, it doesn't matter who wins. Both parties are focused on keeping the Aussie market going.

It's worth noting here that Australia sits in third place on the Heritage Foundation's Index of Economic Freedom, behind other Asia powerhouses Hong Kong and Singapore. Given Heritage's political preferences, that's a pretty good tribute to Australia's ability to avoid socialist reforms, even from its Labor governments.

3. You'll Pay 30% Less Than Everyone Else

Most people won't invest in Australia until they get "confirmation," a moment also known as "too late."

You, on the other hand, are right on time.

Aussie shares trade at 18.7 times earnings at the moment. That's just about the same rating as the New York market.

But its 4.1% yield is twice as high as New York's.

You see, Australian companies still have the habit of paying decent dividends. Unlike share repurchases, which benefit insiders and institutions, cold, hard cash distributions benefit you.

And as a whole, the dividend-rich market is still trading 30% below the peak reached in early 2008. So there's plenty of room for further advances.

How to Make Money

The simplest way to play Australia is the iShares MSCI Australia Index ETF (NYSE: EWA).

This has net assets of $1.9 billion, a nice yield of 6.1%, and an expense ratio of only 0.53%. Four of its largest five holdings, however, are banks, so its exposure to the growth-oriented resources sector is only limited. You get Aussie exposure without getting too involved in the volatile commodities markets directly.

There's also a stock that offers the safety of broad exposure to the Australian economy, as well as some direct investment in the dynamic commodities and energy sectors, with an emphasis on retailing, coal mining, fertilizer, and insurance -- Wesfarmers Limited (OTC: WFAFY).

It's selling at 19 times trailing earnings and about 17 times forward earnings, with a yield of 3.5%. When growth returns, you'll be sitting on a solid (and likely growing) dividend, as well as healthy capital gains from all sectors. A nice total return pick.

Australia's largest company, and the world's largest mining company, is BHP Billiton Limited (NYSE: BBL). BBL is well diversified both geographically and product-wise, with interests in energy, iron ore, copper, silver, lead zinc, molybdenum, and gold. BHP is currently trading at only 12.5 times forecast 2014 earnings, with a 3.7% dividend yield, although in terms of net asset value, it is fully priced at 2.4 times.

Still, it's probably the easiest and most direct way to play Asian growth. But you need to bear in mind that it's a direct play in commodities and is going to be volatile. This is not for the faint of heart. For example, BHP recently reported earnings and, due to the "China Syndrome," had a 30% drop in revenues and a loss of $5 billion year over year.

But a $2.7 billion move into the potash sector (key to the agriculture sector) promises to be a smart investment in coming quarters.

Another direct play is Australia's largest oil company, Woodside Petroleum (OTC: WOPEY). At this point, China is the most energy-hungry nation on the planet, and all countries in its economic sphere of influence are in the same energy-starved situation.

Woodside has a thirsty Gargantua on its doorstep and will benefit accordingly once growth kicks in again. It's trading at only 9.6 times trailing earnings, with earnings expected to increase modestly in 2013. Assuming it doesn't repeat the special dividend it paid in May, WOPEY will give you a dividend yield of about 3.2%. That's a nice piece of cash to wait for things to turn around in Asia.

Source :http://moneymorning.com/2013/08/23/how-to-make-46-on-my-australian-independence/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in