Investment Themes 2017-20

04/11/2017 2:40 am EST

Focus: STOCKS

Rich Karlgaard

Editor-at-Large, Forbes

Editor-At-Large Rich Karlgaard reports nine themes for longer-term investors from the recent Forbes Cruise for Investors for the April 25 edition of Forbes.

Trump, tech and geopolitics form a volatile mix. Traders love the roller coaster. But how do you step back, see the big picture and invest with a longer time horizon?

Last month I spent three weeks on the road (and over water) on a Forbes Cruise for Investors from Singapore to Hong Kong, with port calls in Thailand, Cambodia, Vietnam and China, trying to spot longer-range profit. Here are nine themes.

Emerging markets. Mark Mobius, Franklin Templeton’s emerging-markets bull for the last 30 years, visits 70 countries a year in a Gulfstream V. The busy traveler says emerging-market stocks are generally priced 25% cheaper than American stocks by P/E. The returns have been higher, but, of course, so has the volatility. Cambodia is the poorest of the southeast Asian countries we visited. Big rewards, big risks, says Mobius. Vietnam is on a roll and is a safer bet.

Dividends, Part 1. With US markets at a 26 trailing P/E ratio, it’s a good time to become selective—and to get paid while enduring the occasional correction. John Buckingham, whose value-and-dividend fund has outperformed both the S&P and Warren Buffett over the last 15 years, likes Apple, Allianz, Amgen, AT&T, Boeing, Cisco, Corning, Disney, Fluor, Intel, Royal Caribbean and Target. Buckingham takes a three-to-five-year horizon on his stock picks.

Dividends, Part 2. Investor Kelley Wright uses five metrics to whittle thousands of stocks into 300 or so candidates: Look at a stock’s 12-year results, which cover three four-year business cycles. Be certain that there’s enough float so you can sell whenever you want to, that there is institutional-buyer support, that the stock has an S&P rating of A or better and that the stock paid uninterrupted dividends for at least 25 years. As for when to buy and sell, Wright graphs the stock’s highs and lows against its yields. He buys when the stock price is at a cyclical low compared with yields. He sells when it’s the opposite.

US energy boom. Mark Mills noted that oil and gas production per well has increased fourfold since 2008. Thank fracking technology and the venture capital and private equity markets that support new exploration. Houston is the Silicon Valley of oil and gas. Silicon Valley’s infatuation with social media, e-commerce and driverless cars almost completely blinds it to what is happening in Houston and around the world. The real story, says Mills, is the intersection of US energy independence and a coming materials-science revolution based on oil-based polymers. Buy Dow, Dupont and Baker Hughes.

Incredible shrinking intelligence, Part 1. Pardon me, if this sounds like television news or the Middlebury College student body. The real impact of shrinking intelligence will show up in the Internet of Things (IOT), including bug-size drones and dust-size sensors. To profit from this trend, says Mark Mills, buy chip companies, such as Intel and Qualcomm. Also consider GE. Yes, GE stock has disappointed under Jeff Immelt’s rein. But Immelt’s vision of an IOT future is about to pay off.

Incredible shrinking intelligence, Part 2. Wearable computers have been hyped. But actual products, such as the Apple Watch, have disappointed. So why be excited about wearables? Expand the term “wearables” and the market isn’t new at all. It’s big and proven: pacemakers, artificial hips— you get the idea. The big play in wearables is not about gadgets, it’s about health. Tiny cameras you swallow to have a look at your GI tract. Arterial plaque-busters you inject. The pure-play opportunities, of course, are in the private venture capital market. But big pharma and biotech will buy a lot of the startups. Buy big pharma and biotech.

Corporate bonds beat government bonds. Companies usually have a clearer mission for the funds. Governments too often borrow for reasons that make no sense. Bond expert Marilyn Cohen told the Forbes cruisers to avoid government bonds for nonessential projects and to skip municipal and state bonds from cities and states in long-term economic decline.

US real estate is cheap! Our cruise began in Singapore and ended in Hong Kong, two cities where residential real estate prices make Manhattan and San Francisco look inexpensive. Luxury condos in Hong Kong are upwards of $7,000 per square foot. Last year a property sold for $22,000 a square foot.

Your genius self. Warren Buffett says the best return comes from investing in yourself. He’s right. It’s always a good time to invest in yourself. But now is a particularly good time. Trump, tech and geopolitics are disrupting so many industries that one’s knowledge is constantly in need of a refresher. Thus, before launching on the Forbes cruise, I spent a week at GAP International’s Leveraging Genius Conference. GAP’s goal is to get you to notice the difference in your thinking and language between your best and your less-than-best selves. Well, that’s easy, you think. But when you dive in, you discover that your layers of negative thinking and speech have often become a habit and are more cemented than you thought. Good stuff. I highly recommend it.

Readers are welcome to join Forbes and the Cleveland Clinic on our next cruise, aboard the Crystal Serenity. It starts in Vancouver on July 29, stops in several ports in Canada and Alaska and returns to Vancouver on August 8.

For more on the cruise, click here or call 1-800-530-0770 to learn more.

Rich Karlgaard is Editor-at-Large/Global Futurist at Forbes. His latest book, Team Genius: The New Science of High-Performing Organizations, came out in 2015. For his past columns and blogs visit www.forbes.com/Karlgaard.

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