Can Tesco Outperform Wal-Mart Stores?

By Roland Head 

March 21, 2013 

LONDON -- If you're interested in building a profitable, diversified portfolio, then you will often need to compare similar companies when choosing which share to buy next. These comparisons aren't always as easy as they sound, so in this series I compare some of the best-known names from the FTSE 100, the FTSE 250, and the U.S. stock market.

I use three key criteria -- value, income, and growth -- to compare companies to their sector peers. I've included some U.S. shares, as these provide U.K. investors with access to some of the world's largest and most successful companies. Although there are some tax implications to holding U.S. shares in a U.K. dealing account, they are pretty straightforward, and I feel they are outweighed by the investing potential of the American market.

Today I'll take a look at supermarket giants Tesco (LSE: TSCO  ) (NASDAQOTH: TSCDY  ) and Wal-Mart Stores (NYSE: WMT  ) , which owns the Asda supermarket chain in the UK.

1. ValueThe easiest way to lose money on shares is to pay too much for them. So which share looks like a better value?

Metric	Tesco	Wal-Mart
Current price-to-earnings ratio	10.9	14.4
Forecast P/E	12.5	14.7
Price-to-book ratio	1.8	3.2
Price-to-sales ratio	0.5	0.5

Tesco edges ahead of Wal-Mart in terms of value, offering a lower P/E on both a historic and forecast basis. Tesco also trades on a much lower P/B ratio than Wal-Mart, although the two supermarkets' P/S ratios are evenly matched thanks to their near-identical profit margins. The P/S ratio can be useful for comparing the profitability of different companies within the same sector.

2. IncomeWith low interest rates set to continue for the foreseeable future, dividends have become one of the most popular ways of generating an investment income. How do Tesco and Wal-Mart compare in terms of income?

Value	Tesco	Wal-Mart
Current dividend yield	3.9%	2.6%
5-year average historical yield	3.5%	2.2%
5-year average dividend growth rate	8.9%	12.6%
2013 forecast yield	3.8%	2.2%

Tesco's dividend yield is 50% higher than that of Wal-Mart. U.S. dividend yields tend to be lower than comparable U.K. yields, and although Wal-Mart's dividend has grown at a faster rate than Tesco's over the last five years, the firm's payout ratio -- the proportion of its earnings paid as dividends -- remains lower than that of Tesco.

For me, Tesco is a clear winner in the income stakes, but although both companies have an outstanding record of continuous dividend growth -- 28 years for Tesco and 39 years for Wal-Mart -- it's worth noting that Tesco's dividends have not been covered by free cash flow since 2010, unlike those of Wal-Mart. Free-cash-flow cover is a good measure of dividend safety: Using reserves or borrowed money to pay shareholder dividends is not sustainable in the long term.

3. GrowthEven if your main interest is value or income investing, you do need to consider growth. At the very least, a company needs to deliver growth in line with inflation -- and realistically, most successful companies need to grow ahead of inflation if they are to protect their market share and profit margins.

How do Tesco and Wal-Mart shape up in terms of growth?

Value	Tesco	Wal-Mart
5-year earnings-per-share growth rate	9.5%	9.7%
5-year revenue growth rate	8.6%	4.5%
5-year share price return	(2.1%)	45.4%

In terms of shareholder returns, Wal-Mart has hugely outperformed Tesco over the last five years. The U.S. firm's share price has risen by 45% during a period when Tesco's share price has languished and delivered almost zero returns. Yet underlying this, both companies have grown their earnings per share at a similar rate, and Tesco's revenue growth has moved ahead of that of Wal-Mart. What's more, over a 10-year timeframe, Tesco's shares price has risen by 120%, outperforming Wal-Mart's more modest 47% 10-year gain.

Should you buy Tesco or Wal-Mart?Tesco is in the middle of a much-publicized effort to turnaround its fortunes. Apart from improving its existing stores, one aspect of this is cutting expenditure on very large new stores. Over time, an improved focus on profitability and smaller stores should help to improve its cash flow situation and support its dividend. Although Wal-Mart's finances appear to be more robust at present, I think Tesco's greater yield is worth the risk for U.K. investors, especially given its low P/E ratio, which makes the company look better value than Wal-Mart in my view.

In terms of growth, Tesco's stronger revenue growth rate appeals to me, because over time it should facilitate stronger earnings growth than Wal-Mart, assuming other factors -- such as profit margins -- remain roughly equal.

2013's top income stock?Although both Tesco and Wal-Mart are attractive income shares, the utility sector remains one of the best places to find reliable, high-yielding income stocks. But not all utilities are equal, and some are facing serious challenges that could lead to dividend cuts.

http://www.fool.com/investing/general/2013/03/21/can-tesco-outperform-wal-mart-stores.aspx

Hyperinflation Nation

The Dollar Bubble (Uploaded on 23 Nov 2009)

Uploaded on 23 Nov 2009
The Dollar Bubble starring Peter Schiff, Ron Paul, Marc Faber, Gerald Celente, Jim Rogers, and others. Prepare now for the U.S. dollar collapse.

Warren Buffett's career advice

"Take the job you will take if you are independently wealthy."

Personal finance lending grows

KUALA LUMPUR:  Personal financing expanded by 30% last year, the fastest growth over the last three years, mainly due to lending by nonbank financial institutions (NBFI), said BNM in its 2012 Financial Stability and Payment Systems report yesterday.

Although the majority of borrowers were those earning less than RM3,000 per month, BNM said the credit risk had been well mitigated as about 80% of the borrowers have stable jobs and a regular salary with loan repayments deducted automatically at source.

“These developments are nonetheless being closely monitored particularly in light of recent innovations observed on product offerings by the NBFI,” it said in a statement released in conjunction with its 2012
BNM annual report.

NBFIs accounted for 12% of total credit to the nation’s household sector. But collectively, these institutions provided 57% of personal financing credit to households and such credit has been increasing significantly in recent years.

Last year, overall credit on all facilities extended by the three largest NBFIs expanded at a faster rate of 23.1%. The strong credit expansion was primarily driven by the personal financing activities which grew 30%
last year.

In 2010, personal financing grew 28.7% while in 2011 it recorded a growth of 25.1%. According to the statement, as at the end of last year, the banking system’s gross impaired loans ratio improved to 1.5% for the household portfolio, 2.9% for large businesses and 3% for small and medium enterprises.

“Following the implementation of the Guidelines on Responsible Financing during the year, banks are also more thorough in assessing borrower affordability with more prudent buffers allocated in the computation of debt service ratios, improved processes and documentation in income verification,” said BNM in its report.

The bank’s risk-weighted capital ratio and core capital ratio stood at 15.2% and 13.4% as at end of last year with financial buffers in excess of RM80 billion.

The banking system’s total capital ratio for financial institution was at 14.5% as at end of January this year.
Domestic implementation of the Basel III global regulatory reform package will significantly raise the level and quality of banks’regulatory capital starting January this year until December 2018.

This article first appeared in The Edge Financial Daily, on March 21, 2013



Business & Markets 2013
Written by Zatil Husna of theedgemalaysia.com
Thursday, 21 March 2013

Cyprus risks euro exit after EU bailout ultimatum

By Michele Kambas

NICOSIA | Thu Mar 21, 2013 11:02pm GMT

(Reuters) - The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.

In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to impose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week's shutdown.

Parliament will reconvene later on Friday to debate a raft of government crisis measures after lawmakers adjourned a late-Thursday sitting saying they needed more time for consultation.

Even those measures looked likely to fall short of a promised "Plan B" to raise the 5.8 billion euros (4.92 billion pounds) demanded by the EU in return for a 10 billion euro lifeline from the EU and IMF.

The European Central Bank said it would cut off liquidity to Cypriot banks without a deal, and a senior EU official told Reuters the bloc was ready to see the island banished from the euro to contain damage to the wider European economy.

Angry Cypriot lawmakers on Tuesday threw out a tax on deposits, calling the EU-backed proposal "bank robbery".

After more talks on Thursday, the currency union's finance ministers urged Cyprus to table a new proposal.

Trying to placate its lenders, the government proposed to parliament a "solidarity fund" that would bundle state assets, including future gas revenues, as the basis for an emergency bond issue, likened by JP Morgan to "a national fire sale".

It also sought the power to impose capital controls on banks, a type of measure unseen since before the country joined the single currency bloc five years ago.

ECB PATIENCE FLAGS

The European Central Bank, which has kept Cyprus's banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

"Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks," the ECB said.

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.

"If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency," the EU official said.

Cypriot banks, crippled by their exposure to Greece, the centre of the euro zone debt crisis, have been closed all week and are not due to reopen until Tuesday.

Long queues formed on Thursday at ATMs still dispensing cash, and there were angry scenes outside parliament where several hundred protesters, many of them bank employees, rallied after rumours the second-largest lender, Cyprus Popular Bank, was to be wound up.

Chanting "Hands off the bank", several demonstrators jostled with riot police.

"We have children studying abroad, and next month we need to send them money," protester Stalou Christodoulido said through tears. "We'll lose what money we had and saved for so many years if the bank goes down."

The central bank said it was readying measures to keep Popular Bank afloat. Some banking officials said it could be split between good and bad assets.

LIMITED OPTIONS

Under the levy rejected by parliament, EU lenders, notably Germany, had wanted uninsured bank depositors to bear some of the cost of recapitalising the banks, but Cyprus feared for its future reputation as an offshore banking haven and planned to spread the burden also to small savers whose deposits under 100,000 were covered by state insurance. Lawmakers threw it out.

In Moscow since Tuesday, Cypriot Finance Minister Michael Sarris said he was discussing possibleRussian investments in banks and energy resources, as well as an extension of an existing 2.5-billion-euro Russian loan.

He said Cyprus had no plans to borrow more money from Russia and add to its debt mountain. The Russian Finance Ministry had said on Monday that Nicosia sought an extra 5-billion-euro loan.

The chairman of the euro group of finance ministers, Dutchman Joreon Dijsselbloem, told the European Parliament in Brussels that Moscow informed the EU it had no intention of ploughing more money into Cyprus.

Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.

Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island's predicament.

(Additional reporting by Jan Strupczewski and Luke Baker in Brussels, Karolina Tagaris and Costas Pitas in Nicosia, Georgina Prodhan in Vienna, Lidia Kelly and Darya Korsunskaya in Moscow and Paul Carrel in Frankfurt; Writing by Matt Robinson; Editing by Will Waterman)

http://uk.reuters.com/article/2013/03/21/uk-eurozone-cyprus-idUKBRE92F07R20130321?feedType=nl&feedName=uktopnewsmid

Forget Cyprus, Nobody Is Stealing from Depositors More than Bernanke

By Bernice Napach 

After the Federal Reserve reaffirmed its easy money policy Wednesday, Chairman Ben Bernanke was asked whether the U.S. would ever think of taxing bank depositors as Cyprus has done. He said that was very unlikely but Jim Rickards, senior managing director of Tangent Capital Partners, says the Fed already has its hands in depositors’ pockets.

“Nobody is stealing more money from bank depositors than Ben Bernanke,” Rickards tells The Daily Ticker. Bernanke's doing that, Rickards says, by maintaining interest rates near zero.

Related: There are No Bubbles, QE is Working

“At this stage of a recovery normalized interest rates should be around 2-3%,” says Rickards. “Apply that 2-3%…to the entire multi-trillion-dollar deposit base of the United States of America and that’s a $400-billion per year wealth transfer from savers to bankers so they can pay themselves bigger bonuses or make crazy bets.” Over time, Rickards says, that wealth transfer could reach $1 trillion.

Rickards says zero interest rates are just one way the Fed is fleecing depositors. Others include increasing inflation, which Bernanke is trying to do, and taxing deposits like Cyprus is pushing for.“Bernanke is stealing more money from depositors than Cyprus is... looting everyday Americans—teachers, firemen and retirees,” says Rickards.

There’s another way, of course, to view Fed policy: that near-zero interest rates and $85 billion worth of asset purchases every month are helping to boost economic growth and employment and maintain low interest rates for both short-term and long-term debt. Bernanke himself, testifying before the Senate Banking Committee late last month, said, “The benefits of asset purchases, and of policy accommodation more generally, are clear…monetary policy is providing important support to the recovery.”

But Rickards says the easy money policy is creating asset bubbles that may feel good for now but will eventually crash. Cyprus could crash much sooner than that.

Related: Cyprus is a Game Changer for Investors: Jacob Kirkegaard

The ECB today set a Monday deadline for the island nation to finalize an agreement with the bank, the European Union and IMF in order to qualify for emergency funding. If no deal is reached by the Monday deadline Cyprus will lose access to emergency funds and its banking system could collapse. That’s especially bad news for the Cypriot economy because not only does it depend on its banks, as most economies do, but its banking system is 7 to 8 times the size of its 70-billion-euro GDP.

About 30% of those deposits are reportedly from Russia.Talks are expected to continue throughout the weekend and now reportedly include Russia.

"‘At least now the Russians and the Europeans are talking…so there’ll be some kind of resolution,” Rickards says.

There's even speculation that Russia’s gas producer Gazprom (OGZPY),which has its own bank, could lend Cyprus some money.

http://finance.yahoo.com/blogs/daily-ticker/forget-cyprus-noboby-stealing-depositors-more-bernanke-170851783.html

Cyprus' Unprecedented Bailout: More Common Than You Think

By Morgan Housel 

March 18, 2013 

The tiny nation of Cyprus was bailed out by its eurozone partners and the IMF this weekend. That much is barely news. The bailout of a country with a broken banking system is now known as a slow Sunday.

But there was something different about Cyprus' bailout that sent shivers through the global banking system. Deposit holders in Cyprus banks are being forced to pay for part of the deal. The original deal, which looks like it's now being revised as I write this, says those with 100,000 euros or more in Cyprus banks will have 9.9% of their deposits levied -- or taxed, or confiscated, or whatever you want to call it. Those with less than 100,000 euros will take a 6.75% haircut.

This is rare, if not unprecedented, in modern bank bailouts. Deposit holders have long been considered sacrosanct. In the U.S., we have the FDIC. A bank's shareholders can lose everything when it screws up. Bondholders can take a hit, too. But deposit holders, particularly small mom-and-pops, are typically untouchable. "The FDIC has a long history of stability and safety," says former chairwoman Sheila Bair. "No one has ever lost a penny of insured deposits." Europe can't say the same. 

But there's another side to this story.

If Cyprus had its own currency, it would be dealing with its economic problems by printing money. That would eventually cause inflation. How much? I don't know, let's say 6.75%. In that case, those with cash deposits in Cypriot banks would lose 6.75% of their money in real terms -- the same amount being directly confiscated on most deposits through the IMF bailout. 

Think of it that way, and Cyprus's bailout fee is only unprecedented in a semantic way. When a government directly takes 6.75% of deposits, people freak out. When the government takes money indirectly through 6.75% inflation, few are concerned.

There are two takeaways from this.

The obvious one is that Cypriots are getting a raw deal only if you consider the bailout fee in isolation. Compared with what would have likely occurred without a bailout, it isn't bad at all. Most estimates I've seen of what would happen if Cyprus were forced to leave the euro and return to its old currency predict a devaluation of 40% to 60%. The country was in a terrible position with no easy solutions. It took the least bad option.

The other takeaway is that when it comes to cash, the difference between inflation and a direct levy is minimal. Most don't think of inflation as a fee because they don't see money being directly removed from their bank accounts. But the effect on wealth is the same in the end. Sheila Bair is right that no one has ever directly lost a penny on FDIC-insured deposits. But an untold amount of deposit wealth has been lost to inflation.

I'm neither a conspiracy theorist nor a goldbug, and this is not an anti-Fed rant. There will always be inflation, and dealing with it is more useful than grumbling about it. There are plenty of options to invest money at rates of return above inflation. Charlie Munger once said: "I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I've seen a tremendous amount of inflation in my lifetime. Did it ruin the investment climate? I think not."

The problem is that so many investors have willingly made themselves subject to inflation's mercy, plowing into cash and bonds that yield less than inflation. They are subjecting themselves to their own mini-Cyprus bailout fee year after year.

What's unfortunate is that they may not even know it. Cypriots are well aware of their fee. They see the headlines. They'll see the withdrawals. Money here today will be gone tomorrow. Other people around the world who invest in the comfort of FDIC-insured cash and bonds yielding nothing, I'm afraid, are much less aware.

http://www.fool.com/investing/general/2013/03/18/cyprus-unprecedented-bailout-more-common-than-you.aspx

This Has Been a Huge Win for Buffett

By Steve Symington 

March 19, 2013 

Since Warren Buffett released his annual letter to Berkshire Hathaway (NYSE: BRK-B  ) (NYSE: BRK-A  ) shareholders earlier this month, I've spent some time dissecting the world-famous CEO's unsurprisingly eloquent words of wisdom.

First, I explored the value of Buffett's relatively hidden series of bolt-on acquisitions. After all, while it may seem crazy that any company could quietly spend $2.3 billion to absorb 26 distinct, profitable businesses into its existing operations in a single year, Berkshire managed to do just that in 2012.

Next, I noted Buffett's propensity for outperforming the broader market over the long haul, thanks (in Buffett's words) not just to Berkshire's "outstanding businesses, a cadre of terrific operating managers, and a shareholder-oriented culture," but also largely to the company's incredible ability to effectively function as a defensive stock.

Let's talk about the big boys
Now, we're going to take a look at an excerpt from Buffett's letter in which he highlights the strengths of some of Berkshire's larger "outstanding businesses":

Last year I told you that BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy -- our five most profitable non-insurance companies -- were likely to earn more than $10 billion pre-tax in 2012. They delivered. Despite tepid U.S. growth and weakening economies throughout much of the world, our "powerhouse five" had aggregate earnings of $10.1 billion, about $600 million more than in 2011. Of this group, only MidAmerican, then earning $393 million pre-tax, was owned by Berkshire eight years ago.

Buffett goes on to note the $9.7 billion gain in annual earnings delivered to Berkshire by the five companies was "accompanied by only minor dilution," thanks to the fact that three of the five businesses were acquired on an all-cash basis. The fifth, of course, was Burlington Northern, of which 70% was paid for in cash with the remainder covered by newly issued Berkshire shares, which increased the amount outstanding by 6.1%. 

Sure enough, here's yet another example that Buffett knews what the heck he was doing when he acquired five huge, solidly profitable companies to the benefit of Berkshire shareholders with little dilution. Of course, that's not to mention Buffett has also been actively working to reverse at least some of that dilution, most notably through the company's recent substantial share buybacks.

Even still, let's put things in perspective by digging a little deeper to see just how effective these acquisitions have been. In addition to owning 89.8% of MidAmerican, here's the skinny on Buffett's remaining aforementioned purchases, circa the end of 2011:

• May, 2006: Purchased an 80% stake in Iscar for $4 billion in cash.
• December 2007: Acquired 64% of Marmon Holdings for $4.8 billion in cash.
• November, 2009: Acquired the remaining stake of BNSF for $26.3 billion in cash and stock.
• March, 2011: Acquired Lubrizol for $9 billion in cash, at the same time assuming $700 million of its debt.
• In "early" 2011: Acquired an additional 16% of Marmon for approximately $1.5 billion, bring Berkshire's stake to 80%.

When we consider the fact that Berkshire's slice of net earnings from MidAmerican last year totaled more than $1.3 billion, that leaves nearly $8.4 billion in 2012 earnings achieved as a direct result of Buffett's spending $46.3 billion over the past seven years for its stakes in Iscar, Marmon, BNSF, and Lubrizol -- not a bad recurring return on investment by any measure, thanks to Buffett's supreme demonstrations of patience and a long-term outlook. What's more, Buffett later wrote that "unless the U.S. economy tanks -- which we don't expect -- our powerhouse five should again deliver higher earnings in 2013."

As an aside, it's also important to note that Berkshire yet again raised its stake in Marmon late in the fourth quarter of 2012, bringing it to 90%. Additionally, according to its most recent 10-K, Berkshire will purchase the remaining 10% sometime in 2014 with a price to be determined from an existing formula based on Marmon's future earnings.

Of course, any one of Berkshire's "powerhouse five" could easily be considered a fantastic business in its own right. After all, that is why Buffett bought each of them in the first place. However, Berkshire's comprehensive value becomes much more apparent when you combine those businesses with its world-class insurance operations, which not only provided a $1.6 billion underwriting profit in 2012, but the float from which also gave Buffett more than $73 billion in free money to invest. 

As we look at Berkshire from a broader standpoint, this also goes to show just how relentless and effective Buffett's efforts have been to diversify his company's income streams. In addition, considering the fact that Buffett still has a cash pile of least $15 billion pegged for acquisitions (even after putting $12 billion to work last month for a 50% stake in Heinz(NYSE: HNZ  ) ), you can bet it won't be long before he adds another elephant to the ranks of his powerhouse brands.

Foolish final thoughtsIn the end, I'm reminded of a comment last year from a friend of mine when he joked that Berkshire was his favorite "mutual fund." There's certainly some truth to the statement, but I think even that doesn't do justice to the depth of Berkshire's enviable moat. 

As Buffett wrote in his 2011 shareholder letter, "When you look at Berkshire, you are looking across corporate America." Thanks to his unparalleled good judgment, though, it might be more accurate to rephrase that statement as "When you look at Berkshire, you are looking across [the best of] corporate America" (addition mine).

http://www.fool.com/investing/general/2013/03/19/this-has-been-a-huge-win-for-buffett.aspx

Socio-economic targets achievable by moving from race-based to a needs-based policies.

Thursday February 28, 2013

Rafizi: NEP will be phased out

By MARTIN CARVALHO
mart3@thestar.com.my

PETALING JAYA: Pakatan Rakyat will gradually do away with the New Economic Policy (NEP) and move towards a needs-based economic policy if it takes over Putrajaya, said PKR strategy director Rafizi Ramli.

“We are going to move from race-based to needs-based policies and that will automatically phase out the NEP,” he said during a briefing on Pakatan Rakyat's election manifesto here yesterday.

He added that this could be achieved as Pakatan would focus on restructuring the economy towards the RM4,000 household income target under its manifesto.

He clarified that Pakatan was not against affirmative action via the NEP.

“What we are really against is corruption and cronyism under the guise of 30% bumiputra equity under the NEP,” he said.

Earlier, Rafizi said that the social-economic targets set under the manifesto were achievable between a five- to 10-year period.

He was confident that Pakatan would remain in power to execute its economic restructuring plans.

However, he conceded there was no guarantee that the RM4,000 household income would be achieved as it is merely an economic target.

Asked on how Pakatan intends to foot the annual RM45.75bil expenditure costs to achieve the manifesto's numerous promises such as lowering fuel and electricity costs, abolishing toll, free education and financial aid to the needy, Rafizi said three approaches would be taken.

He outlined thrift spending, weeding out corruption, priority spending on necessary projects and increase in revenue collection due to stronger economic growth of between 6.5% and 7.5% as sources of funds.

He cited Pakatan-led Selangor state government's annual savings of 24% or RM104mil as a yardstick for Pakatan's target of saving RM49.5bil through its three-pronged approach.

http://thestar.com.my/news/story.asp?file=/2013/2/28/nation/12770540&utm_source=also_see&utm_medium=link&utm_campaign=None%20in%20family%20discussed%20purchase%20with%20me%2C%20Shahrizat%20tells%20court

Ten signs your stock will double

Date March 16, 2013

Nathan Bell

Everyone loves the idea of buying stocks that double in price. But how do you spot them? Here are 10 quick pointers:

1. Out of favour

A stock that's out of favour – hated even – is potentially an investor's most rewarding opportunity.

Intelligent Investor recommended News Corp in July 2011 at the height of the phone-hacking scandal when the price had fallen to $14.58. Since then it's more than doubled.

What most investors missed was the fact that the company's newspaper businesses were insignificant compared with its pay TV and movie operations, which were travelling along nicely. It was the quintessential out-of-favour stock.

2. Hidden progress

Computershare, the world's largest share registry, last year completed the purchase of BNY Mellon. As a result, it now controls about 60 per cent of the US registry market. That has huge potential to deliver cost savings and higher earnings when corporate activity recovers. The company has made hidden progress but the market is yet to catch up.

3. New technology

Sirtex owns an innovative treatment for liver cancer that costs $US14,000 ($13,500) per dose. When Intelligent Investor recommended it as a "speculative buy" in November 2010 at a price of $5.90, the company was involved in litigation with a major shareholder, directors owned very few shares and profitability was declining.

But new clinical trials were underway that could increase the market size for Sirtex's product tenfold.

The results of the trials aren't due until next year but the share price has almost doubled since late 2010 in anticipation of the potential financial rewards.

4. Investment in R&D

In his book, Common Stocks and Uncommon Profits, Philip A. Fisher suggests that the best companies to buy are those investing heavily in research and development to provide future profits.

After recommending blood products manufacturer CSL in March 2011 at $33.97, its share price surpassed $60 recently. This year the company will invest more than $400 million in research and development – more than its entire revenue in 1997.

5. Industry tailwinds

Air travel tends to grow at about twice GDP growth. That's a lovely tailwind for an airport business (less so for airlines where the benefits get competed away). At the bottom of the market in 2009, Sydney Airport stock hit a low of $1.45. With passenger growth recovering, the stock price is now $3.16 and it has paid handsome distributions along the way.

6. Changes to industry structure

The internet has all but destroyed traditional newspaper companies. In their place have arisen online classifieds sites such as Realestate.com.au, Carsales and Seek. All trade at multiples of their float price while companies such as Fairfax struggle. The structural shift has destroyed some businesses and created others.

7. Owner-managers

When owner-managers put their money on the line, pay close attention. Investors in four-wheel-drive accessories manufacturer ARB Corporation and Flight Centre would understand the benefits. Stocks that double tend to have exceptional management with a vested interest in maximising the value of their shareholding.

8. Insider buying

Directors buying stock is another indicator of a potentially cheap stock. Flight Centre's Graham Turner last purchased shares on market at a price of $3.84 on March 16, 2009. Now, the company's share price is well over $30. Directors know their businesses well. It pays to watch their activity.

9. Financial strength

The strong financial position of serviced office provider Servcorp meant it could purchase cheap leases during the GFC and reap the benefits when the market recovered. That's one of the reasons why the stock has increased more than 40 per cent since the middle of last year.

10. Unrecognised by the market

When the stock price fell below $20 a year-and-a-half ago, complaints about Macquarie Group's return on equity failed to recognise the value of its large capital cushion, and investors ignored its more stable businesses such as funds management, which were growing, and supported a decent dividend. The market is now catching on, with its share price more than doubling since the 2009 market lows.

Genuinely independent thinking and a thorough understanding of the facts increase your chances of buying stocks that will double in price. Next time you're considering a stock purchase, use this checklist.

The more factors you can tick off, the greater the chance of your next purchase doubling in price.

This article contains general investment advice only (under AFSL 282288).

Nathan Bell is the Research Director at Intelligent Investor Share Advisor, shares.intelligentinvestor.com.au.



Read more: http://www.smh.com.au/money/investing/ten-signs-your-stock-will-double-20130316-2g72h.html#ixzz2NvyYjZln

Are you scared to invest? FEAR is your friend

Monday March 18, 2013

Are you scared to invest? Billionaire Warren Buffett's tips on how to overcome it

Financial Snacks - By Joyce Chuah

“If you’re going to be this way each time your shares drop by one sen, you might as well just sell them off!”

Fear is a common emotion in our lives and in many instances, it protects us from danger.

However, investors' fear may be more punishing than protective, writes JOYCE CHUAH.

I HAVE often said this in my seminars: “Many of us want to invest but a few of us are NOT prepared to be investors.”

The common question among investors is often “How much are we making?” True, profits are after all the benchmark we set for a successful investment plan. However, many often choose to forget that in the process of seeking profits, there will be times of unrealised losses and times of unfavourable returns due to events beyond anyone's control.

Even if it is an event which one tries to predict (such as the general election date!), many forget that such events are just temporary and not catastrophic, where total and irrecoverable loss cannot happen. The test of a successful investor is when the rubber hits the road' − that is, when faced with a loss position, can you prevent yourself from reacting and allowing fear to push you to sell your loss positions?

Fear protects us from danger, as in a fight or flight situation. But investors' fear may be more punishing than protective because it prepares us to react and changes our perspective of the external events.

Joyce Chuah

I have often said that the acronym F.E.A.R. stands for “False Evidences Appearing Real”, as fear deletes, distorts and generalises events which may are not as adverse as they seem or as we are told.

It is no wonder that Warren Buffett is one of most successful investors in the world. He practises what he termed as “inactivity” as an investor. Instead of reacting to fear, Buffett says, investors should learn to be calm and inactive.

His thoughts are best summed up in four of his famous wise quotes:

“The stock market is designed to transfer money from the active to the patient.”

“Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.”

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for 10 years.”

“My success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.”

http://biz.thestar.com.my/news/story.asp?file=/2013/3/18/business/12815616&sec=business

Eurozone officials decided levy to be imposed on all deposits in Cyprus

On Saturday, Eurozone officials decided that a 6.75% levy would be imposed on all deposits under €100,000. Accounts over €100,000 would have a levy of 9.9%. The intention is to bring down the bailout cost. Although Eurozone officials insisted that this measure of imposing levies on deposit is limited to Cyprus. There are genuine fear among investors regarding Italy and Spain.

The global anxiety due to Cyprus are now heightened.

Santa Claus politics underscore Malaysia’s elections - the "sweeteners" will be paid for by the same voters who thought they got them for free

Santa Claus politics underscore Malaysia’s elections, says Singapore paper

MARCH 17, 2013

As Election 2013 fever spurs Malaysian politicians from both sides to serve up expensive sweets to boost their bid. - file picKUALA LUMPUR, March 17 — As Election 2013 fever spurs Malaysian politicians from both sides to serve up expensive sweets to boost their bid, a Singapore paper reminded voters today that they would be the ones to pick up the tab. 

“The intense fight for votes has led both the administration of Prime Minister Najib Razak and the opposition PR to promise more and more populist measures. 

“You could call it Santa Claus politics,” Reme Ahmad, assistant foreign news editor in the widely-read Straits Times, wrote in an opinion piece for the paper’s Sunday edition. 

He noted that Najib who leads the ruling Barisan Nasional (BN) has been dishing out more cash “gifts” to offset rising living costs that are the main concerns of a significant 40 per cent of the 13.3 million voters struggling with bread-and-butter issues; and signal there may be more to come if the coalition maintains power. 

Among the billions of ringgit worth of sweeteners he listed were the second round of RM500 cash aid for each household, RM200 smartphone rebates for the hundreds of thousands of youths, the RM250 student book vouchers and just last week, pay hikes for the country’s 230,000 policemen and soldiers who are seen to form a core deposit in the coalition’s vote bank. 

The writer noted that the Pakatan Rakyat (PR) opposition, which is seen to be a viable contender to take federal power for the first time, has also promised many goodies. 

Among them, he listed free university education, cheaper utility bills, lower transport costs through cuts in car and petrol prices and highway tolls that formed the key proposals in PR’s manifesto launched last month. 

“But here is one worry the politicians are downplaying. 

“With all the goodies disbursed or promised, will the next government shift more public money towards productive activities such as upgrading ports and boosting worker education, or will it be forced to give yet more sugar and spice to voters fattened by everything nice?” the writer asked. 

Reme said that the reality was that sugary deals and promises of more handouts will not necessarily reel in the votes, as several political observers here have said. 

“The harsh reality is that the more you give, the more people want. 

“A second point is that the freebies have to be paid for by somebody down the line,” Reme said. 

He pointed that Malaysia is already into its 16th year of a budget deficit since the 1997 Asian financial crisis that the money to pay for the government’s spending came from taxes and “other piggy banks, such as national oil firm Petronas”. 

He reminded that tax revenue that could have been spent to build new roads may instead be funnelled for other purposes to keep the political election pledges, like petrol price subsidies or compensating highway companies to remove their toll booths. 

“In other words, they will be paid for by the same voters who thought they got them for free.”

http://www.themalaysianinsider.com/malaysia/article/santa-claus-politics-underscore-malaysias-elections-says-singapore-paper