Ten Years. Five Choices. What Do You do?


I read a brilliant story in the Wall Street Journal the other week. It highlights to me why the future is so bright and what the eternal doomsters keep missing.

Mukesh Ambani is India’s richest man. He’s infamous for building a 27-storey mansion that’s become the world’s most expensive home.

Here’s the real story. His company is called Reliance Industries. In the last two years, it has spent $US35 billion dollars to bring 215 million Indian consumers online.

This is through incredibly cheap access to a 4G network Reliance has built across the country. Consumers can make free calls and access nearly unlimited data for US$2.10 a month.

The company built a cheap ‘smart’ phone from scratch to help India’s poor access the 4G network.

In turn, this is paving the way for US firms like Amazon, Netflix and Facebook to build up a presence in India. Indians now download more apps from the Google App store than Americans…

1.7 billion people worldwide to come into modern finance still

 The implications from this are quite staggering. One is that it supports why the US tech stocks can keep pushing higher. The market in front of them is still enormous.

Only 28% of India’s 1.3 billion people are even connected to the internet at all.

This makes a major US stock market collapse that takes down Australia’s ASX highly unlikely, in my view.

Secondly, it opens up an enormous opportunity to get India’s unbanked population access to financial services.

It may be 2018, but there are still 1.7 billion people today that don’t have a bank account.

Cheap data and cheap phones can bring these people into the consumer economy. Access and use of credit are the lifeblood of any economy.

Think of the stupendous levels of data this will generate, all of which artificial intelligence algorithms can analyse for insight and better outcomes across all industries.

The potential economic uplift from this in the future is enormous.

I maintain we are on track for a huge expansion in wealth over the next decade – regardless of bumps in the stock market.

Something similar is about to happen across the USA and Australia, too. The rollout of the 5G network is going to require prodigious capital spending and an incredible uplift in potential services from the rapid speed.

You should be hunting for investment opportunities around this.

I can say the same about Asia, generally.

Asian markets have been under pressure since February. The Shanghai and Hong Kong markets, for example, haven’t come back in the same way as the US did. absorbine

Even the US listed Chinese shares are getting hammered.

Nobody is more astonished than me to see Alibaba [NYSE: BABA] back trading under US$150.

It still looks like an opportunity to accumulate it to me.

A bit of history helps here…

The secret to making 100 to 1 in the stock market

My colleague called Chris Mayer wrote a fine book called 100 Baggers: Stocks the Return 100 to 1 and How to Find Them. Pick up a copy on Amazon. It’s worth it.

This was no small under undertaking. The research underpinning it cost US$50,000.

One of the findings from the book is that stocks that make big returns can come from any industry.

More importantly, for today’s purposes, half the battle for getting a monster return like that is being able to sit through some huge downturns.

Nothing EVER goes up in a straight line. In fact, it can look downright ugly at times.

Consider the market darlings of today…

Captain D’s Guest Survey

Apple [NASDAQ: AAPL] has suffered 80% drawdowns twice.

Amazon [NASDAQ: AMZN] went from US$96 in December 1999 to $5.60 in 2001.

It 2008 it got cut in half again.

Netflix [NASDAQ: NFLX] lost 80% of its value in 2011. It went under US$8. It’s over US$300 today.

All of these staged huge comebacks.

Chris often talks about an idea he calls the ‘coffee can’ portfolio. The idea originally comes from the Old American West.

People used to put their most valuable possessions in one of these and hide it. Only the most treasured possessions – jewellery one assumes – would go in. A decade later, they’d still be there, and, presumably, still valuable.

Let’s transplant this idea to the stock market. Chris suggests putting five to ten stocks aside along the same idea. Be careful about what goes in. You can’t change it for ten years.

Fast forward to 2028…

A couple will turn out to be total duds. But, if your original reasoning is sound, you could be sitting on some monster returns, because nothing in the market ever shook you out of your positions.

Chris puts the strength of the idea like this…

The coffee can portfolio is designed to protect you against yourself — the obsession with checking stock prices, the frenetic buying and selling, the hand-wringing over the economy and bad news.

‘It forces you to extend your time horizon. You don’t put anything in your coffee can that you don’t think is a good 10-year bet.

What stocks would you be happy to put aside for ten years and never touch?

Alibaba would be a candidate for me. The expansion of the Asian middle class will not be stopped by a dud week for the Dow Jones.

It’s something to think about over the weekend – juicy answers can be shared next week.


Callum Newman Signature

Callum Newman,
Editor, Profit Watch