Big gain hunting

Tuesday, 14 August 2018
Melbourne, Australia
By Bernd Struben

  • Buffett, Waislitz, and Volkering…
  • Abbott channels Einstein to slam energy policy

It’s a huge structural advantage not to have a lot of money. I think I could make you 50 percent a year on $1 million. No, I know I could. I guarantee that.

Warren Buffett

You almost have to be a multi-billionaire to spruik the advantages of not having a lot of money.

But Buffett, quoted above, isn’t talking about the advantages of flying economy class over first class. Or the benefits of scrubbing down your own home rather than hiring that chore out to a cleaning service.

No. Buffett is talking about the advantages small investors have over big institutional funds.

You’ll sometimes hear these big funds referred to as ‘the smart money’. That’s because they’ve got a lot of researchers digging up details on stocks that ‘ordinary’ investors won’t have access to.

But here’s the catch.

The big boys play with investments in the many millions on single transactions. Their total funds under management often reach into the many billions of dollars.

This effectively locks the big players out of the often highly lucrative small-cap sector of the market. After all, if you need to shift $20 million into a new stock, you can hardly buy into a company valued at $50 million without immediately moving the market.

Fortunately, as Buffett points out, you and I don’t have this problem.

Nor, it seems, does billionaire investor Alex Waislitz. Though clearly he’s investing more than just a few hundred dollars at a time.

More after the markets.

Markets

Overnight the Dow Jones Industrial Average closed down 125.44 points, or 0.50%.

The S&P 500 dropped 11.35 points, or 0.40%.

In Europe the Euro Stoxx 50 index finished down 16.60 points, or 0.48%. Meanwhile, the FTSE 100 fell 0.32%, and Germany’s DAX dropped 65.61 points, or 0.53%.

In Asian markets, Japan’s Nikkei 225 is up 403.65 points, or 1.85%. China’s CSI 300 is down 0.72%.

In Australia, the S&P/ASX 200 is up 43.93 points, or 0.70%.

On the commodities markets, West Texas Intermediate crude oil is US$67.52 per barrel. Brent crude is US$72.88 per barrel.

That puts WTI down a few cents per barrel and Brent up a few cents since this time yesterday.

But as I’ve been writing for the past many months, the mid and longer-term trend for oil prices looks to be down. I won’t rehash all the reasons here today. But the big one remains the US. Namely the massive amount of oil unlocked by fracking and other new technologies used to ‘squeeze’ oil from shale.

To see what I mean have a look at the following graphs:



chart image

Source: EIA / Bloomberg
Click to enlarge


This graph shows the rapid growth of US oil exports (blue line) relative to oil imports (black line).

In May this year, for example, the US exported 233 million barrels of oil and imported 317 million. Just one decade ago (May 2008) imports stood at 400 million barrels while exports were a mere 55 million.

If the trend continues as expected, the US will become a net oil exporter over the next decade. From Bloomberg:

The U.S. has gone from a big-time net importer of oil to a small-time one. The latest base-case forecast from the EIA is that it will be a “modest net exporter” from 2029 through 2045.’

Now have a look at this graph:



chart image

Source: EIA / Bloomberg
Click to enlarge


It’s hard to get the precise figures from the graph. But in 2008, the US exported 10.5 million barrels of oil…not a huge leap from the 3.6 million barrels exported in 1908.

This year US oil exports are expected to hit 607 million barrels.

With this kind of supply growth in mind, you can see why Trump isn’t overly concerned with cutting Iranian oil from the global market…even as he calls for lower fuel costs. And you can see why oil investors should be prepared for a 10–15% fall from current prices.

Turning to gold, the yellow metal is trading for US$1,193.35 (AU$1,641.02) per troy ounce. Silver is US$15.02 (AU$20.66) per troy ounce.

One bitcoin is worth US$6,188.77.

(To stay atop all the latest news and investment advice on bitcoin, ether, XRP, litecoin…and the rest…click here.)

The Aussie dollar is worth 72.72 US cents.

Buffett, Waislitz, and Volkering…

Now, where were we?

Oh yes. Billionaire investor Alex Waislitz’s impressive track record in the Aussie stock market.

His secret to success? Activist investing in small-cap and microcap companies.

From The Australian:

Billionaire investor Alex Waislitz keeps finding winners in some of the country’s smallest listed companies.

Waislitz has at least five stocks that have doubled in value over the past 12 months, ranging from one of the hottest companies on the ASX to small but fast growing technology and energy plays.

The best stock for the billionaire’s private investment group Thorney has quietly been one of the best small cap floats this year, Melbourne education technology company ReadCloud…

Waislitz also has long been a shareholder in another startling success, fintech company Afterpay — which has doubled in value in the last two months alone. Afterpay shares are up 143 per cent this year.’

You can see his top three picks in the graph below:



chart image

Source: Bloomberg / The Australian
Click to enlarge


Of course, none of this is news to our own small-cap expert, Sam Volkering.

Sam runs five separate investment advisory services at Port Phillip Publishing. Three of them focus on technology stocks and cryptocurrencies. The other two are all about microcap and small-cap stocks.

Sam’s reasoning for that aligns closely with Warren Buffett and Alex Waislitz.

In fact, over at Australian Small-Cap Investigator, Sam recommended Touchcorp Ltd [ASX:TCH] to his readers back in June 2016. That was before the merger of Afterpay and Touchcorp in July 2017 formed the newly named Afterpay Touch Group Ltd [ASX:APT].

The Australian labels Afterpay’s share price performance a ‘startling success’. But there was nothing startling about it to Sam.

At the time of recommendation he wrote that ‘E-commerce and digital payments stock could help net a quick-fire 65% by year’s end’.

Readers who took Sam’s advice and held onto the stock — as he’s recommended doing — have done far better than 65%.

How much better?

As of Monday morning’s market open, the share price was up 455.1% since Sam tipped the stock.

Now before you rush out and buy shares in Afterpay, be aware that it’s currently trading well above Sam’s recommended buy-up-to price. That doesn’t mean the share price might not go higher. But it does mean if you choose to invest, be sure to do your own research.

While on a note of caution, obviously not every one of Sam’s small-cap picks matches the success of Afterpay. Small-cap stocks tend to be more volatile and risky. Some will go down in value. Never invest money you’re not prepared to lose.

Having said that, overall Sam’s track record at Australian Small-Cap Investigator has been stellar. Good enough, in fact, to earn an A+ in Port Phillip Publishing’s annual report card for 2017.

You can see the performance of Sam’s open positions in the service from February 2016 through to January 2018 below:



chart image

Source: Port Phillip Publishing Report Card
Click to enlarge


Now as I mentioned above, Afterpay is no longer an active recommendation. Nor are a few of Sam’s other best performing stocks.

But if you’re hunting for big gains in the smaller end of the market, don’t worry. Sam has narrowed his focus down to three Aussie listed small-cap picks he believes could deliver returns of 1,000% — or more — within the next 18 months.

He details everything in his new report, ‘Three 10X Stocks to Buy Before They Break Out’.

Click here for all the details.

Questions or ideas you’d like to share?

Send your letters to letters@portphillipinsider.com.au. If we publish your email, we’ll only use your first name.

Finally, here’s the latest on the government’s NEG from The Australian Tribune:

‘Abbott Channels Einstein to Slam Energy Policy’

Albert Einstein is credited with saying, “The definition of insanity is doing the same thing over and over again but expecting different results.”

Tony Abbot amended the language a bit but struck the same note in addressing the government’s energy policy. He argued that idiocy is doing more of the same and expecting a different result.

He also believes blackouts and electricity rationing are…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another, then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd