On the first Monday after the ‘miracle’ Morrison election victory, the Switzer Financial Group launched the Internet-version of my old Sky News Business program — SWITZER.
With the closure of the Your Money channel, it was the most logical thing to do. We co-broadcast on You Tube and www.switzer.com.au and to celebrate I lured fund manager Charlie Aitken of Aitken Investment Management to explain the post-poll surge of S&P/ASX 200. You can watch the episode here.
He made the point that a bank like Westpac made its annual yield, plus those surviving ‘blessed’ franking credits for all, in one day! And the other big banks weren’t far behind. However, he then returned to his previous mantra that his investment strategy going forward would be, and I quote: “Australia for income and overseas for growth.”
I think he’s probably 80% right, to guess a number, because I think we’ll see growth here for our stock market, as tax cuts eventually meet interest rate cuts in a world where a Trump-China trade deal eventually happens.
On my Switzer Show podcast, Michael McCarthy of CMC Markets says he sees a technical breakout for the local market so he thinks we could easily test our all-time high level on the S&P/ASX 200 Index of 6851.50. If he’s on the money, given where we are now, that would be a 5.2% gain, plus say 2% for half-a-year of dividends plus 1% for franking credits, giving a potential gain of around 8% by purely backing the top 200 companies on the Aussie stock market via an ETF like STW, IOZ or VAS, which tracks our top 300 companies on the ASX.
But if you want to accept Charlie’s advice, you could also play the ETF game, where you can get exposure to the overall US market via IVV, which is iShares way of letting you chase the returns of Wall Street’s top 500 companies at a cost of, wait for it, 0.04%!
This will give you gains for the S&P 500 Index, which has already grown 323% since the 9 March 2009 low, when the Index closed at 676.53, after the onset of the 2008 financial crisis and the Lehman Brothers’ bankruptcy.
Someone like Charlie thinks individual companies will provide more oomph to your portfolio, especially when buying with a lower Aussie dollar that could go lower, as two expected interest rate cuts happen this year. I asked him for his favourite US stock now and he quickly went for the well-placed Microsoft, which straddles every computer and smartphone we use in an increasingly ‘cloud-dependent’ world we live in nowadays.
Writing in Investorplace.com, Vince Martin likes the very well-known Exxon Mobil (XOM), which he says even surprises himself! “With the dividend over 4% and a 14.5 times forward price-earnings (P/E) multiple, Exxon Mobil stock looks like a value play. Meanwhile, management is forecasting that earnings can double by 2025, adding modest growth to the story.”
Sticking to the big names, he likes Bank of America (BAC) as the standout financial stock. BAC “trades near its highest levels since the financial crisis, and has gained over 100% from July 2016 lows…and there’s a case, perhaps, to wait for a better entry point.”
Especially with our lower currency, this is a stock you might think about if there’s another pullback on Wall Street. With President Donald Trump in charge, that could easily happen.
“Despite the big run, it’s not as if BAC is expensive. The stock still trades at less than 10 times 2019 EPS estimates. Unless the economy turns south quickly, that seems too cheap. So it looks like the big run in Bank of America stock isn’t over yet.”
I like to watch what hot stocks hotshot investors like and in late February, Ray Dalio bought into International Paper. Ray who? Ray Dalio is the founder of the world’s largest hedge fund, Bridgewater Associates. The fund has been a consistent top performer that relies heavily on algorithms developed by Dalio and his research team. “He earned nearly $8.1 billion in profit in 2018, making Bridgewater Associates the best-performing hedge fund in the U.S. for the year. The fund currently manages assets worth nearly $124.7 billion,” writes Neha Chamaria on fool.com.
“It was among Dalio’s top five stock additions in the quarter ended December 31, 2018, as Bridgewater bought 1,311,306 shares in the paper and packaging company for an estimated average price of $45.85 per share.”
Here is the one-year chart for IP and it’s below Ray’s buy-in price, which might suggest we’re not too late!
And while on the subject of top investors, it’s worth noting that Warren Buffett’s Berkshire Hathaway bought 19.8 million shares of the automotive giant GM. Driving this play fool.com’s Chris Neiger writes “The company’s shares are trading at just six times forward earnings right now…[and] aside from GM’s shares being relatively inexpensive, the automaker’s strong dividend yield of 3.8% is also enticing for many.”
GM is starting to go long electric cars and this could be a game changer for this mega-maker of cars. It’s getting into self-drive cars and even its own AV car-riding service.
“With GM already fast-tracking what it believes will be the future of the automotive industry and the company trading at a discount right now, it’s no wonder Buffett is bullish about this automotive giant,” Neiger concludes.
The share price Buffett bought in at was around $33 and it now trades at $35.54. But given what GN is trying to do, this is more than a short-term play.
Finally, if you want exposure to foreign stocks, you can get them via managed funds listed on the local stock market. Magellan’s MGE does that. Another is WCMQ that has been a top 10 international performer since inception in 2008 during the GFC!
I must admit I have opted for steady names but if you want real alpha stock-picking hi-tech companies, the US is the place to do it but it comes with risks. Don’t forget that.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
