02/11/2005 12:00 am EST
"One of the trends is demand for commodities in China. By 2008, there will be more infrastructure built in China than anyplace in the history of the world. If you take the rebuilding of Europe after WWII, there will be more building in China between now and 2008 than the Marshall Plan times ten. This is creating supply and demand imbalances in a number of commodities.
"Southern Peru (PCU NYSE) is a copper company. They settle their sales in US dollars. There is a supply-demand imbalance in copper, and China is the main buyer of Peruvian copper. The company is paying a 7.2% dividend that’s grown 10% a year for the last four years. And copper prices have jumped 100%, and they are going to jump another 100%. With just some margin expansion or p/e expansion, this stock could be up 50% by the end of next year.
"Another play on this trend that we like is Fording Canadian Coal Trust (FDG NYSE). They provide metallurgical coal, which is in limited supply. They own the largest metallurgical coalmine in Canada and they ship their coal to Japan and China. We see a 30% increase in ore being taken out of the ground, selling at a 100% higher price than last year, with only a 10% additional cost. This is a Canadian royalty trust. The dividend is about $4.50 a year now. That means from the quarterly check you get, about 80% is a return of capital and the other 20% is a dividend. I think we’ll see that check go to $12 or more over the next 12 months.
"I also think that two energy exploration firms, Pioneer Natural Resources (PXD NYSE) and XTO Energy (XTO NYSE) will convert from production companies to royalty trusts. Both of these companies have huge amounts of reserves. And a lot of them are the long-lived type of reserves, such as 15- and 20-year wells. If they converted from an exploration company to energy trust, the stocks would go up about 50% in a day. So we have these on our ballast growth buy lists, purely as a way to play this potential convergence."
Meanwhile, at the InvestorPlace Panel , Toby also offered a favorite high-tech play: "One technology we like very much is Voice over Internet Protocol. We like Westell (WSTL NASDAQ). VoIP is the fastest-growing transformational technology in the world. We like Westel because it provides a wireless phone for VoIP. They currently don’t have wireless phones for VoIP, except through Westel. They just signed a big deal with Verizon, and they will sign additional deals. Westel has a 7 forward p/e, which means it has a lot of room for earnings to hit."