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Thinking Loooooooong Term
Monday, October 03 2011 | 10:27 AM
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|Thinking Loooooooong Term
Last weekend I had a post up that tried to poke holes in the Five Stocks to Hold Forever types of articles. In that post I mentioned in passing that while we don't have to pick five of anything to hold forever, it would make more sense to think about this in terms of countries instead of individual stocks.
An editor at Seeking Alpha asked me to write something up following through on the five country idea which I was not thrilled about doing but then a reader asked the same thing. In thinking about this a little I thought that what this really should be about was five (or any number important to you) top down segments which could include countries but also themes and sectors.
One theme would be things related to food and water. Yes this is a Malthusian argument but it seems very obvious that there is now not enough food and water in many places and a lot of money will be spent trying to solve this problem as the world population continues to grow. Some do not believe in this and so they would have no interest in the theme.
There are plenty of ETFs and individual stocks for this theme taking on all sorts of attributes in terms of countries, volatility and yield.
Another theme but also is about country selection is the Brazilification of other countries. You can probably guess that I mean countries that are likely to become more prosperous and see a middle class emerge/proliferate as they sell resources to other countries. We own Brazil which is relatively mature in this phase but still has a ways to go IMO. We also own Colombia for similar reasons. As I have mentioned before I can see owning Mongolia and Kazakhstan at some point as part of this idea. There are ETFs filed for both countries and we own individual stocks for Brazil and Colombia. At some point I imagine there will be other countries to add to this list like maybe some of the other 'stans or a couple of countries in Africa.
As disclosed in previous posts we have exposure to about a dozen foreign countries and for reasons I've talked about before I guess Chile and Norway would be my two "favorites" but I don't necessarily expect them to be the top performing countries. Both countries are low octane and the fundamentals are very solid which creates a backdrop for ongoing and meaningful outperformance of the US even if they are not the ones that go up 1000% in the next ten years.
Assuming I keep both countries for the next ten years, or even add to their respective weightings, chances are it will be some other country that is the top performer and I obviously don't know which one it would be which is why I believe in owning many countries. In the last decade commodity related countries and small emerging markets seemed to be the best performers and I think that argument is still fully in tact but what if it is some other grouping of countries? What if instead it is the small emerging debtor nations like Hungary and other countries of that ilk? I can't make a fundamental argument for Hungary but that might change.
What about the CIVETS, the N-11 and any other grouping of countries, those could all work out too--or not.
There are other ideas we could also add to the list including natural resources, Africa and some Asian markets where there is really not much of a stock market yet; Laos and Cambodia come to mind. Who's to say that five years from now there won't be a Cambodian cement company with ADRs on the NYSE?
My favorites will be my favorites until they aren't, if you take my meaning.
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