offshore funds ideas for 2007
portfolio construction – part deux
windows and doors, gold taps and plasma tv’s
Last month, predictions for 2007 plus the general idea of portfolio construction was the topic and in subsequent newsletters and mailings I intend to cover each of my preferred “foundations and roof” funds.
Just as a reminder - It is my belief that an investment portfolio is a bit like a house. Specifically, when you build a house you do not put the roof on first, you start with the foundations and the walls and you try to make those as solid as possible before you go on and add luxuries like roofing, doors, windows and plasma TV’s.
This month, since it is still the start of the year I thought we should look at some of the areas identified in the January newsletter that we would consider as being significant growth areas for 2007 before it is too late.
All the following can be accessed through your portfolio bond (PPB) or our new online nominee service.
The following is in part made possible by input from The Sovereign Society, Hugh Hendry of Eclectica, Forsyth Partners, Scott Campbell at MitonOptimal, and Castlestone Management
As always, if you want to invest in any of the following funds or ETF’s, let me know. An ETF, by the way is an exchange traded fund which is similar to a collective investment fund except that it trades at net asset value (NAV)- with no initial charge – on a stock exchange and can be bought and sold in the same way as any listed security.
Japanese Small Cap Stocks
Japan still remains a bargain and it has some of the world’s most dynamic smaller companies trading at a big discount following a poor 2006.
As measured by the Tokyo second section index, Japanese smaller companies include over 500 domestic issues. Since January 2006, the index has plunged 23% in Yen terms and 22% in US Dollars. Coupled with the fact that Yen could be the stronger currency in Dollar/Yen for 2007, this could be the year for this market.
Buy the ETF – Street Tracks Russell/Nomura Small-Cap Japan up to $56.25, (currently at $52.27)
Buy the fund – JP Morgan JF Small Cap Class A Fund
Gold, Silver
I first told you to buy Gold at $420, today it is $645. Honestly?, I finally followed my own advice and bought at $620. But will it go higher from here?
Experts predict the previous all time high for Gold of $850 to be exceeded in 2007. The trend for Gold’s continued rise remains in place. Typically these moves are in a 13 to 15 year cycle, and we are now only in the sixth year of the cycle.
Silver has outperformed the other three precious metals and should continue to do so in 2007, experts predict it heading for $20 per ounce.
Palladium and Platinum; the latter is probably going to have the least gains of the four but Palladium is significantly undervalued.
Buy the ETF – Lyxor Gold Bullion Securities, Lyxor Precious Metals - and iShares Silver Trust
Buy the fund – Aliquot Gold Bullion and Aliquot Precious Metals
Timber
Combination of clean-green and soft commodity underperformance make this sector attractive but notoriously hard to find any way to buy in through an actual listed or collective investment vehicle.
Plum Creek Timber is an S&P listed real estate investment trust (REIT) with a market cap of US$7 billion. The REIT owns more than 8 million acres and also produces lumber, plywood and medium density fiberboard in 10 downstream manufacturing facilities in the Northwest US.
With a Dividend yield of 4%, a 20% discount to management NAV valuation and a long depressed commodity price this appears to be an excellent opportunity.
Buy the REIT – Plum Creek Timber Company
Asian Emerging Markets
Apart form the obvious India, China, Russia which I have been pushing now for eons via FMG’s fabulous Rising 3 Fund, concentration appears to be focusing on some of the other areas in the region that are perhaps less high profile
The worst performing market in Asia is about to turn the corner in 2007. The best global values now lie in Taiwan with her manufacturing prowess – technology. Windows Vista is finally available to all and is likely to spawn a boom in new PC sales which means chips.
Buy the ETF – iShares MSCI Taiwan Index
European Large Caps Stocks
Expected to outperform and far less volatile than anything above.
Buy the ETF – iShares DJ Euro STOXX 50 or iShares DJ Euro STOXX Growth
Oil
I thought seriously about buying Oil at $42 last week, today it is $45 and Jim Rogers, “Mr. Commodity” says he still sees $100 per barrel after a “correction” - he just does not know when that correction will happen. Hugh Hendry says that although prices have now reached his lower band area as defined by their “mean reverting system” whatever that is, he is still not a buyer because just as prices can enjoy substantial premiums to their mean so prices can overreact to the downside.
Correction coming?
IF you feel the correction coming we have a long list of Reverse Index Certificates from Commerzbank available on most major indices.
As always, if you want to invest in any of the following funds or ETF’s, let me know. An ETF, by the way is an exchange traded fund which is similar to a collective investment fund except that it trades at net asset value (NAV)- with no initial charge – on a stock exchange and can be bought and sold in the same way as any listed security.