People often look at what is happening in the world to find out what to do in the stock market. I do the same; but I also do it the other way around.
I look at the stock market to find out what is going on in the world. It is useful to do this because the most successful investments are those riding on the back of major trends in the world economy.
Let’s pick an example. In the recent past three companies, Inditex, quoted in Spain and London, Hennes & Mauritz, quoted in Sweden and London, and Esprit, quoted in Hong Kong, have all reported better than expected trading with strong growth in sales and profits.
Catch up with the latest pricesGlobal competitors in the affordable fashion worldEach of the three companies mentioned above is building global chains of shops selling affordable fashion. They compete head-to-head with each of them, for example, having a shop in Kensington High Street; indeed Inditex has two of its brands, Zara and the more upmarket, Massimo Dutti.
It is obvious from the way these businesses are trading that consumer spending is in healthy shape around the world. It is also a reflection of the growing spending power of younger women. These trends are likely to continue so I expect each of these shares to continue to be a rewarding investment. Inditex and Hennes & Mauritz are already in the TSW portfolio, Esprit certainly deserves to be included.
Higher up the scale (you can spend nearly £4,000 on one of their trench coats) is Burberry’s. They are also in the TSW portfolio and doing well. I had a look at Hermes, famous for its horsy patterns on ties and scarves and its fairly eye-watering prices. The shares are flying. They have come up from a price of five euros in 1993 to 95 euros presently and are up around 50 per cent in the last six months. Hermes brings in another of my favourite themes, the increasing ubiquity of millionaires and billionaires.
Catch up with the latest UK prices and charts hereClimate Exchange puts out statement after shares doubleA huge theme at the moment is the environment. Companies and governments are jumping on the green bandwagon with a vengeance. One of my recent TSW tips, Climate Exchange, had to put out a statement on Thursday saying that it knew of no reason why its shares had shot up so much, doubling in recent weeks, other than increased investor interest in both the exchange and carbon related sectors. Other shares with a green tinge are shooting higher.
This effect spreads far and wide. Two shares that have been strong in recent days are Johnson Matthey and Aquarius Platinum. Johnson Matthey describes itself as a specialty chemicals company, which manufactures catalysts, pharmaceutical materials and pollution control systems. Both companies benefit from the soaring platinum price. Platinum is used in catalysts to control harmful car emissions so plays a major role in the battle to cut pollution.
Global infrastructure is another powerful theme. Everywhere you look there is a requirement for more and better infrastructure. Demand is bottomless; what is needed is funding. In a world awash with money there is plenty of funding around so more of the needed infrastructure is being designed and built. This benefits loads of companies. British consulting engineers, for example like WSP, Hyder Consulting, White Young Green, Scott Wilson Group, WS Atkins and Mouchel Parkman are all trading strongly with record order books and sharply improving profit margins. The first three of these companies are already in the TSW portfolio; the other three could easily have joined them.
Catch up with the latest UK prices and charts hereFlood of money and deals as football clubs go globalA combination of plenty of money and an ever-growing eagerness to do deals is fuelling an incredible mergers and acquisitions boom with deals being done that a few years ago would have stunned observers.
Who would have imagined that Manchester United, Liverpool and Chelsea would now belong to two American billionaires and a Russian billionaire respectively, while another leading British club has recently been bought by an Icelandic multimillionaire. Equally who would have imagined that the British steel industry, in the form of Corus, would have been bought by an Indian company. This is globalisation with a vengeance.
It is also a spectacular trading environment for investment banks. Companies like Lazards, Merrill Lynch, Goldman Sachs (in the TSW portfolio), Lazards, Deutsch Bank, Investec and others are making unbelievable amounts of money and becoming gigantic businesses in the process working their mysterious financial alchemy across the globe. Goldman Sachs is capitalised at nearly $100bn with profits exploding; its no wonder its senior employees need Securicor vans to collect their pay.
Catch up with the latest UK prices and charts hereMajor investment themes is endlessThe list of major themes is endless. The current transformation of many UK property companies into REITS (Real Estate Investment Trusts) able to buy and sell properties without incurring immediate tax liabilities its part of a worldwide trend to creating greater liquidity in property markets.
In effect property is being converted into an easily traded asset class like bonds and equities. This process is facilitating a surge of money into property worldwide and propelling share prices for TSW stocks like Capital & Regional.
Other themes are online research (Datamonitor, ToLuna, Research Now and YouGov in the TSW portfolio) and the Internet generally with Google as the star Internet-related constituent in TSW.
Look at any successful share in the TSW portfolio and that effectively means all of them otherwise they would not be there, and you will find a business riding an important global trend. Among the shares mentioned above I hold Climate Exchange, Hennes & Mauritz, Burberrys, Aquarius Platinum, WSP, Scott Wilson, ToLuna, Research Now and YouGov.
Catch up with the latest UK prices and charts hereNew heights for London property pricesIn a recent editorial I was speculating on the possibility that prices for the penthouses being built opposite Harrods at One Hyde Park might sell for as much as £50m to buyers hoping that one day they would be worth £100m.
It seems I was too cautious. One of the penthouses has reportedly already been sold, three years ahead of completion, for £84m. The buyer obviously thinks he has snaffled a bargain and my guess is that he is probably right. A 20,000 square foot stunningly specified house in the sky at the heart of the world’s financial capital in an era of globalisation is arguably virtually priceless, even if there are going to be four of them.
Indeed the really amazing thing about this site is the thinking of the people who created Bowater House, the undistinguished dungheap that stood there before. It beggars belief that the people involved would have described themselves as architects. I love seeing buildings go up; I never though I would find such pleasure in seeing one come down.
