By Nick Markola CIMA®
2012 turned out to be a lot better than most predicted this time last year. We are grateful the Mayan’s and their calendar skills were subpar.
2012 was a centennial year for Albanians with global commemorations and many great events. Centennial events reminded us all of our rich history, great accomplishments, of centuries of all struggles and victories and of our European roots. We should always celebrate our rich history and traditions, but always remember that we need to work hard and smart to achieve even more in the future. Each one of us should give our contribution. In my view, it is important for all of us to invest wisely, create a strong society of successful investors in various fields globally, starting from the United States to Europe and as far as Australia. Having strong investor portfolios on individual basis provides for our families. It further provides for the common good and gives us all more leverage. As 2012 is winding down, taking a closer look at our portfolios and positioning them for 2012 is prudent. Europe, despite all of its woes, maybe a good place to consider investing. Exploring going back to our roots, going back to Europe, always makes sense.
In positioning investment portfolios for the coming year, Wall Street professionals and investors are looking across the globe. There are walls of worries about the Fiscal Cliff and deficits in the US, sovereign debt in Europe, soft or hard landing in China, commodity crisis in Latin America and the nuclear issues in the Middle East, just to name a few. However, there are also investment opportunities throughout the world investors can capitalize on despite the challenges. Europe has been in the news extensively. Images of rioting folks in Greece or workers demonstrating in Italy, France or Spain may be fresh in our minds. There are arguments that Europe has entered into a depression and that may lead some to argue why considering investing in an area, in or on the brink of depression may profitable. They may argue for investments in economies that are growing at healthy rates.
For starters, it is very important to draw a clear distinction and delineation between economies and stock markets. While the performance of economies and markets may coincide during some periods, it is crucial to understand that often their performance diverges and goes in opposite direction. In support of this, one should look at the US in 2012. GDP growth has been anemic, but the equity markets have been very strong, returning well over 10%. China’s growth in the past has been very strong but equity markets have not. Brazil’s economy has grown at attractive rates but the equity market has not behaved the same. If one needs more evidence to understand that economic growth and stock market performance don’t behave the same way, a look at Europe in 2012 is a case in point. The European economy put up negative growth, while equity markets across Germany, France and UK were up in double digits with the Pan European Stoxx Europe 600 Index up almost 20%.
Debt crisis is still raging in Europe and some of the European governments are in very difficult financial situation. However, some European companies, unlike their government, are in much better financial position and flush with cash. Barron’s reports that companies in the Stoxx Europe 600 Index, had approximately €600 billion ($800 billion) in cash at the end of 2011, substantial increase from the €540 billion at the end of 2007, according to data from Thompson Reuters Eikon. Approximately a third of the companies in the index are currently debt free which means that they have plenty of cash on the sidelines waiting to be deployed. Corporate earnings are further forecasted to rise by 5% to 10% in 2013. Price to earnings multiples, a frequently used measure to analyze investments, have significantly improved in 2012 for European companies. The real catalyst for such an improvement may be the actions of the European Central Bank (ECB). The ECB tried on numerous occasions in the past to deal with the crisis but not with much access. Over the summer, it appears that the markets were encouraged with the actions and comments of the ECB President Mario Draghi that they will spare no measure and will do everything possible to deal with the European debt crisis. The July 2012 pledge by Mr. Draghi that they will do “whatever it takes” appears to have soothed the market participants in Europe.
With the negative news out of Europe and with the recession then potential depression, many European companies have suffered. There are still risks in Europe, especially on the political side. Political risks have somehow diminished but Greece is still a mess. Italy has significant issues to deal with, and Spain and Portugal are on the brink of needing rescue packages. France also has real issues. There has been a lot of chatter about austerity measures in Europe, however, a closer look at government budges reveals anything but austerity as expenses aren’t reined in while spending has increased. The US has seen real issues in getting just two political parties to agree on anything meaningful. Therefore, getting all the European governments to agree on anything meaningful is a challenge.
One of the important tenets of investing is that one should always look for good investments. A more important tenet is to look for good investments in bad places because most will shy away difficult environments. Europe may be considered anything but a good investment place for many, but it is where our roots are. Going back to our roots always makes sense. Some of the companies in Europe I am contemplating on taking a closer look at are the German chemicals producer, Bayer; Swiss luxury goods maker Richemont; Danish drug maker, Novo Nordisk or the Spanish utility Enagas. Investing in stocks is always risky. Taking a closer look at companies in places such as Europe which is going through challenging times from an economic standpoint may provide attractive opportunities in 2013. It will provide an opportunity to go back to our roots and possibly generate attractive returns in this turbulent world.
With best wishes for a wonderful Holiday Season and a happy, healthy and prosperous New Year, be well and invest wisely.
* The writer is the Co-Founder of APEN
Mr. Markola, has certainly given us some very interesting and momentum driven investment ideas with respectable safety rankings. Though my favorite is Novo Nordisk, all four suggestions are quite respectable and deserving individual and careful research by any brave soul venturing in the stock market as an individual investor. Mr. Markola states that “investing in stocks is always risky,” and that should not be taken lightly. I would suggest that any courageous individual venturing into the stock market arena, he or she ought to be guided by a professional like Mr. Markola and always put a trailing stop order limiting your loss to 8%.
Mr. Markola correctly states that 2012 was indeed a commemorating year from the centennial celebration of Albanian freedom from the Turkish empire (the ending of over 500 years of occupation) to a new turning of economic and political order; not to mention the moral ambiguity of western society founded on the Baconian-Cartisian scientific project of the mastery of nature — culminating the the search and discovery of the Higgs-Boson particle, also known as, the “God Particle.” This is the particle that claims to hold matter together being commensurate with the idea of gravity.
Is it a wonder that the economic cycle has taken a turn for the worse? John Locke said “man is an acquisitive animal” made the easier by the scientific project. what is enough and what do we sacrifice in our efforts to acquire money to purchase things or make possible through wealth the tantalization of our senses? Do we give up culture and our way — the Albanian way? What is our way? What is the Albanian way? Who or what do we honor?
Mr. Markola rightly indicates without specifically stating that we should return to our roots. How far back should we go in search for those roots? What is unique with Mr. Markola is his effort is combining his investment acumen with his desire for tradition, an Albanian tradition. His investment suggestions in this article are valuable and should be taken up in earnest. We as Albanians, in developing our individual economic situation can and will create a formidable ethnic unity as a people sharing a common language and history, leading to a more wholesome progeny founded upon tradition and moral valuation moderating the Beconian-Cartesian scientific project of a materialistic world without soul.
I look forward to Mr. Markola’s next article with new investment suggestions. For those who are new to the Stock Market and are interested in investing, my suggestion is that you contact Mr. Markola for guidance and his services as a broker. I do not know Mr. markola, nor do I have any professional relationship with him or his company. My recommending him is purely based on his excellent articles and the fact that he is Albanian with credentials equal to any broker on Wall Street, thus it is best to support our own.