Forget Gold, Buy The Unexpected
Ken Fisher, founder and chief executive of Fisher Investments, is a 25-year Forbes columnist and a New York Times bestselling author.
Fisher: So I think an important thing about 2010 is that we’re at a state today where the combined so-called emerging markets countries in collective GDP are half again as big as the United States. We’re used to thinking of the United States as big and them as small. But collectively, they’re bigger.
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The collective developed world outside of the United States is a little bigger than the United States. We’re at a point where it’s the emerging markets world with an emergent, vibrant middle class that’s growing at a fairly rapid rate that’s pulling us along faster than we would otherwise. Too much commentary about the economy is U.S.-centric. Sometimes America will lead. Sometimes America will lag. right now, America’s lagging.
Whenever we’ve had a huge bear market decline and then a positive 12 months, the subsequent 12 months after that have almost always been nicely positive. So my view is that history’s telling us, with the non-U.S. world pulling us along, we’re probably going to have a positive year in 2010.
Wally Forbes: that sounds very encouraging indeed. perhaps now you could touch on some ways you think the individual investor could take advantage of the situation.
Fisher: well first I’m going to warn against something: there is a near-ubiquitous interest today in gold. and one of the points about gold that I think is not well-appreciated is that since the time of Bretton Woods gold actually has had a nice, single-digit positive return. That’s all come from six very brief periods, the longest and the biggest one of which is the most recent one, the most recent few years.
But if you take those few periods out, those few periods total only 15% of modern history. The other 85% of that history it actually lost money, and at a 3.6% average annual rate.
Forbes: So you would be negative on gold at the moment?
Fisher: well my point would be I’m not a good enough timer to have a view. But I think probably most people probably aren’t good enough timers.
On the positive side, I do believe we’re in the early stages of a normal bull market led by foreign and emerging markets. and one stock that I like a lot is Vivo ( VIV – news – people ), which is Brazil’s largest cellular telephone operator with about 50 million subscribers and about one-third of the market.
Forbes: this is an ADR?
Fisher: yes, this is an ADR. VIV is a symbol. and one of the points that I don’t think people appreciate is that while they’ve grown tremendously in Brazil they also have the potential to expand in Hispanic America outside of Brazil.
Forbes: Terrific.
Fisher: Consumer discretionary stocks do well at a time when people can’t see why they do well. As things improve, the surprise is on the upside. Industrial manufacturers also have that same feature. An industrial manufacturer that plays into the consumer discretionary market is LG Display ( LPL – news – people ) from Korea.
This is the world’s second-largest maker of liquid crystal displays, used in things like personal computers, TVs, cellphones. and this world is one that has gotten crunched terribly. But as near as I can see it, [LG Display] is today operating at what is about what I think of as 10 times this year’s earnings as the earnings are bouncing back. and in this world I see this as a terribly strong stock because it combines the roles of industrial manufacturing while feeding into consumer discretionary with leading market share. The only bigger player is Samsung Electronics.
One more that’s really hard for Americans to see is an Irish company called CRH ( CRH – news – people ). It’s an extremely diversified building materials firm that is arguably one of the best-managed building materials firms around. Amazingly they remained profitable throughout 2009. They operate throughout three dozen nations in the world. They make concrete, cement, asphalt, glass, roofing supplies, pretty much the full spectrum. You’re looking at something that is currently selling at about half annual revenues, five times cash flow, 12 times trailing earnings, probably nine times 2010 earnings. in my mind it’s just a cheap, easy way to go.
Forbes: well, that is a terrific set of items that I am sure are going to be of great interest. Ken, thank you for your time.
Forget Gold, Buy The Unexpected
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