2017? Buy now! Here are the tips for 10 years' time
June 16, 2007
BUFFETT reckons he wouldn't care if the sharemarket closed for 10 years. OK, done. As of next Friday they are going to close the sharemarket for 10 years. You have a week to get set. What are you going to buy? Here's my guess.
Resources — BHP, Rio, Fortescue, Gindalbie Metals, Woodside — let's go with the flow. In the next 10 years the main driver will be the industrialisation of China and the Chinese will become very active investors, globally.
Chinese money will soon smack into equity markets. They will initially invest in the companies causing them the most trouble — they are fed up with being bent over by Australians, Brazilians and Americans.
BHP and Rio? Gone (if they haven't already gone). At huge premiums that imply a $300 price for Fortescue. But Andrew Forrest will have delivered Fortescue to the Chinese already, for $150. It will be another MIM, sold too cheap.
But Andrew won't care. He'll be Australia's richest man.
Gindalbie Metals becomes the largest resources stock in the Australian market and, with its new-found friends in China, it won't last forever either. Add a splash of Woodside.
We'd like to buy a host of other resources stocks but we only have room for a few. Still, against a 22 per cent sector weighting, I reckon we might plunk 50 per cent of the fund into the sector.
Mining services companies follow. If the resources sector makes money, then so will these. Let's have a few Worley Parsons and some of those Boart Longyear. I know everyone bagged them on the float but they just went into the ASX 200 and will be climbing, not falling.
Contractors and developers — Leighton Holdings is one of the few companies with the scale to operate in Asia — will flourish. Downer EDI and United Group are others.
Investment banks? Presumably Macquarie Bank and Babcock & Brown will also one day find the commercial confidence to boldly rather than tentatively step into Asia. They can find investors for anything, especially roads, utilities, power and infrastructure projects. The scale of their Asian projects will leave Australia and US filed under "chicken feed".
Banks are the real boom for Australia beyond Chinese industrialisation. After building everything, the next boom will be servicing the Chinese population. First cab off the rank will be banks. The moment the banks move into China, sell them. They will get flogged if they take their ambitions beyond the cosy Australian high-street monopoly they enjoy.
That's why we invest in them. ANZ has already learned its lesson abroad so we pick it as our preferred exposure to the Australian high street. Long may it continue. We really don't want exposure to the Chinese subprime market collapse of 2015.
Wealth management won't resist getting involved in Asia and they are going to find it hard not to succeed. AXA Asia Pacific will set the example. Let's also slot in a few wealth management and sharemarket companies: Perpetual Trustees, AMP, ASX, Computershare.
Property trusts? Westfield Holdings has 44 centres in Australia, 11 in New Zealand, 59 in the US and seven in Britain. It seems to be missing something. Westfield Beijingland and Westfield Shanghailand, perhaps. A dash of those.
Packer? Forgot to mention. My first dollar will go into PBL Gaming. Take a nation of 1.3 billion people who believe in luck, add Packer and stand back. Include a few Cochlear — it might just eradicate deafness — and have a few Brambles as well.
Of course, a few other things will change in 10 years:
■Disappeared: The ability to write, personal tax rates, Japanese in primary schools.
■New: Nuclear power, water futures, Google everything, Mandarin in primary schools.
■Multiplied tenfold: Everything uranium, petrol prices, bicycle manufacture, the super fund industry, the Future Fund, Andrew Forrest's Windsor knot, Perth