Follow the New Tycoons to the Next Blue Chips
.........and a secret market surging a staggering 814%
Wealth and tycoons are piling up faster in Singapore than anywhere in the world.
Investment assets have jumped an amazing 1,120% since 2000 putting this city-state on a pace to overtake Switzerland by 2020.
How is a country 1/5 the size of Rhode Island beating the pants off London, New York, Shanghai, and Zurich? I am convinced that secrets that created this new tycoon wealth will supercharge your portfolio - with the real potential of turning $10,000 into $57,612 over five years.
This was confirmed during my recent three-week Pacific investment tour. During this trip, I had fascinating meetings with tycoons, bankers and ambassadors. I visited the headquarters of a company so alluring I call it "the best stock for the Pacific Century". But the best meeting - bar none - was with the CEO of a leading private banking firm in Singapore - the financial capital of Southeast Asia. Here new tycoon clients are whisked into opulent conference rooms graced with stunning modern art plunking down a minimum of $20 million in cash just to open an account. That's real tycoon wealth.
A major source of new tycoon wealth comes from a remarkable secret investment strategy I will share with you in just a few minutes. This deceptively simple investment formula I call the New Tycoon Blueprint. This blueprint now targets a region at the ever-shifting center of diplomacy, international politics and capital flows.
But first, let me reassure you that you don't need any special background or education to follow the new tycoon blueprint. Many of you are better educated and grew up in much better circumstances compared to the humble beginnings of most new tycoons.
In fact, you'll need to unlearn some things because while you sitting in front of socialist economics professors, the new tycoons were plunging into the capitalist jungle - getting schooled and street smart.
This goes a long way to explain just how different new tycoons are from the gray executives that fill the canyons of Wall Street.
Executives are hesitant and conservative, tycoons are bold and opportunistic. Executives "allocate" capital to "maximize" profit, tycoons put capital to work to build enterprise, empires and wealth. Executives follow conventional wisdom, tycoons challenge it. Executive pawns react, tycoon kings anticipate 3-4 steps ahead ahead of the competition.
New Tycoon Secrets
So just what are the secrets of the new tycoons? Why does whatever they touch seem to turn to gold?
In short, they think more independently with the very best information and then act boldly.
Tycoons know that the difference between perception and reality = an opportunity to make a killing.
Here are just a few realities that the new tycoons understand and profit by:
New Tycoon Reality #1
The new billionaire tycoons grasp that wealth and capital, power and diplomacy are making a dramatic pivot to the Pacific Rim and emerging markets. Just as the 20th century was centered on the Atlantic, the 21st century belongs to the nations bordering the Pacific Ocean. But the perception that it's all about China is dead wrong.
New Tycoon Reality #2
Where the West sees chaos, turbulence and poverty, the new tycoons sense growth, profitable change and opportunity. They don't need a think tank to tell them about the rise of the middle class in the Pacific Rim and emerging markets - they see and profit from it every day.
New Tycoon Reality #3
While this economic pie of $6 trillion in new spending power is enormous, the new tycoons would laugh at investing in traditional blue chips like Procter & Gamble to capture this growth. They invest in the next blue chips with monopoly power to capture the biggest slice.
New Tycoon Reality #4
The new tycoons are real capitalists like the American tycoons of the early 20th century. But putting their own money on the line makes them more conservative than their bureaucratic, clerkish, gray descendants that manage Fortune 500 companies today.
New Tycoon Reality #5
They exploit and profit from the truth that emerging and frontier markets swing sharply between euphoria and despair. For example, a young Argentine walked into the office of George Soros in 1990 and convinced him to invest $10 million in Argentine real estate. Several years later, this contrarian gambit became $190 million and ir eventually turned into a fabulous $500 million real estate portfolio.
New Tycoon Reality #6
New tycoons look beyond the headlines that always mirror conventional wisdom. In fact, they love bad headlines because they scream opportunity and value.
New Tycoon Reality #7
New tycoon capitalists pay close attention to politics since they realize that shifts create opportunities and most countries are a blend of free markets and state capitalism.
New Tycoon #8
New tycoons are both street smart and sophisticated - looking beyond their home country/region for opportunities worldwide.
New Tycoon Reality #9
These new tycoons build their fortunes by paying very careful attention to price - investing in high potential opportunities only when they are "on sale". This minimizes downside risk and maximized upside potential.
New Tycoon Reality #10
Rather than just react, tycoons anticipate, thinking 3-4 steps ahead. This is the difference between you being a king and a pawn.
To sum up, the new tycoons know what is happening on the ground and beyond the headlines. They shrewdly and patiently invest in future blue chips at value prices. They are bucanneers rather than bureaucrats and they target the world's rising consumer class.
This is why they invest in companies like the "U.S. Steel of Mexico" which rocketed 96.3% in 2012 and the "Ford of India", up 70.4% during the past year - beating the emerging market index by up to a 10-1 margin.
And while you may not be a tycoon yet, I will soon give you a blueprint to invest like one.
This is the same blueprint I used to carefully select my Stock for the Pacific Century recommendation. Although this new blue chip stock trades on a U.S. exchange, it is virtually unknown, priced at a deep discount and perfectly positioned to capture blue ocean growth.
Are You Ready to Invest Like a New Tycoon?
Now, quite frankly, following the new tycoon blueprint is not for everyone.
Yes, there is a bit more risk investing in the leading food company of Singapore, Chile, Panama, Indonesia, Malaysia, Mexico, or Taiwan than investing in Kraft but the potential rewards are far, far, greater.
In short, just imagine the opportunity right now to invest in the Johnson & Johnson stock of a century ago. This is how the new tycoons are building their fortunes at lightning speed while most investors keep falling further behind.
You too can profit greatly by investing in the JP Morgan of Singapore, the Heinz of Malaysia, the Kraft of Thailand, the Google of Russia, the Starbucks of Taiwan, the Chevron of Indonesia and the Jet Blue of Panama.
This is your opportunity - let me tell you how to seize it.
First, you'll need to start thinking differently and getting ahead of the crowd. You need to challenge conventional wisdom since opportunity is the difference between perception and reality. You also need first-class investment intelligence on where global financial and political capital is moving. You need to find, as early as possible, the quality companies best positioned to capture this growth.
But I'm getting ahead of myself. We need to start at the very beginning of the creation of the Pacific century and then drill down to the New Tycoon Blueprint and some stock picks.
The Wind at the Back of the New Tycoons: Three Monster Trade Pacts
Although they don't pay much attention to it, the new tycoons are definitely profiting from a wave of Pacific free trade deals .
For example, the free trade pact between the Southeast Asian regional grouping (ASEAN) and China (ASEAN-China Free Trade Area), took effect in January 2010. By the end of that year, ASEAN exports to China had leapt 54% and overall trade between these countries jumped 47%. This free trade area has become the third largest in the world behind the European Community and North American Free Trade Area. More than 7,000 products trade at zero tariffs.
The next move is a work in progress by China's prime competitors - led by the United States. The leaders of the ten Trans-Pacific Partnership countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Japan, and the United States are negotiating an ambitious 21st century Trans-Pacific Partnership (TPP) agreement that will supercharge trade and investment in the Pacific Rim.
These nine countries represent 55% of the world's economic output. Taiwan and the Philippines have indicated interest in joining the group. This agreement will also boost America's stake in this vital region. U.S. goods exports to the broader Asia-Pacific totaled $775 billion in 2010, a 25% increase over 2009 and equal to 61% of total U.S. goods exports to the world.
Then just last November, negotiations began on a massive ASEAN+6 a free trade zone between India, China, Japan, South Korea, Australia, New Zealand and the ten countries of Southeast Asia. This will create a $17 trillion super free trade zone larger than NAFTA.
When these last three trade accords are signed, the surge in investment and trade will benefit many Pacific Rim countries and tycoons but one region will reap the biggest harvest of profits.
The Sweet Spot & Cockpit of the Pacific Century
While the perception has been that Asia is all about China and India - the reality is that Southeast Asia has left both these giants in the dust. The timing is right for investors like you to capture a piece of this booming region - just like the Scottish taipan tycoons such as Jardine and Matheson did during the 19th century.
Located south of China and east of India, the booming Southeast Asian region is often overlooked by even the most sophisticated investors. Yet it represents ten countries with a population of 620 million (10% of the world's population) and an economic output of $2.4 trillion. The region's economic output is up 170% over the last decade. It has a youthful population with 70% under the age of 30 years old.
Over the past three years, Southeast Asian stock markets have outperformed China and India combined by a whopping 300%.
In the first quarter of 2013 according to the Financial Times, Southeast Asian companies raised $1.9 billion of new capital through IPOs, 30% more than Chinese companies including Shanghai and Hong Kong!
Indonesia is up 814% over the past decade - beating China by 706%!
Indonesia has been one of my favorites for quite some time. Three times the size of Texas, Indonesia is a democracy with the fourth largest population in the world. The country is on a roll fueled by much better fiscal policies. It is the only country in the G20 (largest 20 economies in the world) to have declining government debt/GDP and also has a balanced budget.
All this led to an upgrade by Standard & Poor’s and Indonesian government bonds are now rated “investment grade”. The World Bank reports that Indonesia has the planet’s fastest growing middle class and they are a savvy group. Indonesia represents the world’s third largest user of Facebook behind only the U.S. and the UK.
This country was totally ignored in the 1980s and 1990s. But now the wall of capital washing over this sweetspot has turned it into the best market in the Pacific Rim. The Boston Consulting Group just released a special report on Indonesia; "Asia's Next Big Opportunity" which projects its middle and affluent class growing from 74 million today to 141 million by 2020. This is one reason its stock market is up a staggering 814% over the last decade while China is up only 120%.
You can profit by Indonesia’s rising prosperity by investing in companies like Ace Hardware Indonesia. Ace is a large holding of the Indonesia Fund (IF) is up over 400% since 2009 and over the last decade, its market has had an average annual return of 25%.
There is much more. Sitting astride the biggest trade routes in the world and the two busiest ports, Hong Kong and Singapore. The oil that passes through the Straits of Malacca is three times that which goes through the Suez Canal and fifteen times the volume that passes through the Panama Canal.
And by the end of 2015, the ten countries that make up Southeast Asia will be joined as a common market fueling another surge in trade and investment flows.
And like two turbine engines powering a jet plane, the Singapore and Hong Kong markets are at the leading edge of these capital flows. Together with Australia, these three markets always grab the top three rankings in the Wall Street Journal's annual Index of Economic Freedom and this means that capital and property rights are respected and protected.
In many respects, Singapore is the “Switzerland of Asia” boasting the world's biggest budget surplus relative to economic output. Established by Sir Stamford Raffles in 1819 as an open port to offset Dutch supremacy, it is only one-fifth the size of Rhode Island and three times the size of Washington, D.C.. Nevertheless, it is the most strategically important global trading, finance and service nexus in Asia. The trade that flows through Singapore is worth a staggering 400% of its GDP.
Singapore is the busiest port in Asia, situated next to a vital trading channel, the Straits of Malacca through which 37% of world trade passes. It is one of only seven countries in the world to enjoy an AAA credit rating. Surprisingly, some firms are moving manufacturing centers from China to high-cost Singapore due to the high quality of its infrastructure, logistics and laws protecting intellectual property.
Then there is Malaysia - a solid middle-income country offering investors many of the attributes of its southern neighbor, Singapore, with the added benefit of natural resources and lower wage levels. Malaysia is a constitutional monarchy a bit larger than New Mexico. Rich in natural resources and a natural gas and oil exporter, it offers investors an economic environment of low inflation and debt. Although palm oil, tin, petroleum, copper, iron ore and other commodities are an important part of the Malaysian story, it has a well-diversified economy.
Thailand has done even better with its economy tripling over the past decade without accounting for inflation.
And don't forget that Vietnam’s ace in the hole is that its manufacturing wage rates are less than 1/3 that of China’s. While its per capita GDP has been steadily climbing, it has a very long way to go to catch up to countries like Singapore and Malaysia. The same goes for the Philippines which has cut its sovereign debt in half and was the world's top performing market in 2012.
Taiwan, Hong Kong and even Australia and New Zealand are also considered by many to be part of this bustling region. And why not - they certainly play key roles in supporting and benefiting this region of growth and opportunity.
I even keep a careful eye on some exotic hidden markets such as Burma, a country in transition to ending 50 years of economic and political isolation. Burma is of course rich in oil, gas and timber but it offers investors much more. The size of France and the United Kingdom together with 58 million people, it boasts 1,240 miles of coastline and 600 undeveloped tropical islands. Its 2,000 pagodas and other historical sites will make a high priority tourist destination for jetsetters. Burma will over time close the gap with neighboring Thailand. Thailand now has an economy ten times bigger and 14 million annual tourists compared to a paltry 300,000 for Burma.
And let’s not write off Japan which, despite a disappointing economy, is chock full of very cheap growth companies selling into rising Pacific markets. A weaker yen has boosted the shares of big exporters and its stock market is up 30% since last November. One of my past picks, up 28% in two months, was Fanuc (FANUY.PK) a factory automation company that has robots making robots.
The New Tycoon Pacific Rim - Beyond Asia
The new tycoons realize that the Pacific Rim reaches well beyond Asia and includes Pacific countries such as the United States, New Zealand, Australia, Mexico and Chile.
For example, one of my recent picks, which I believe will be the next Wal-Mart, is an American firm especially active in Central American markets and a stock that has more than doubled over the past year.
It might surprise you that Columbia’s stock market is the best performing market of the last decade with an average annual return over 30%. Rich in natural resources such as oil, coal, and tin, the country has a growing consumer class and Bogota has a larger population than Chicago.
Panama is quickly becoming the “Singapore of Latin America” with world-class financial and communication infrastructure and companies. The country has averaged an 8% growth rate over the past five years fueled by a construction and investment boom. The project to double the capacity of the Panama Canal will keep the ball rolling.
Chile’s 2,653-mile Pacific coastline highlights the county’s export prowess in natural resources such as copper and agriculture products like fruit, wine and vegetables. Chile also has a strong balance sheet with low debt, a balanced budget and an ample rainy day fund.
Companies from all these countries are well positioned to profit from the Pacific century.
From Milwaukee to Manila
Growing up in Milwaukee with six siblings, all indications were that I would be a conventional suit and tie man.
But then I went to study in Japan while at the University of Wisconsin. This year at Sophia University in Tokyo led to a degree in Oriental studies and economics and then it was on to the Fletcher School of Law & Diplomacy. My first job was as a banker with First Bank Boston in London and then heading up its Japan and South Korea banking group.
Next, was a stint as a Vice President with Robert W. Baird advising banks, life insurance companies and pension funds in Tokyo, Hong Kong and Sydney and picking stocks for global hedge fund titan Julian Robertson of Tiger Management.
Then a stint meeting the powerbrokers of Washington where I was an advisor on Asian trade and investment with both the U.S. Senate Finance Committee and the U.S. Treasury. This led to an appointment by Treasury Secretary Nicholas Brady to represent America on the executive board of directors at the Asian Bank in Manila, Philippines.
This was a breakthrough experience.
From this post, I met many tycoons and budding tycoons while leading investment missions to Thailand, Singapore, Nepal, Mongolia, Papua New Guinea, China, Hong Kong, Canada, Vietnam, Indonesia, South Korea, Fiji, Taiwan and Australia. Perhaps the most satisfying part of my post in Manila was helping American firms snag new business in the region. I played a key role in financing a $110 million power project in the Philippines and helped another win a $45 million deal to own and manage a port and airport in Malaysia. We also launched a series of mutual, private equity and venture capital funds firms so private capital could play a leading role in promoting growth. I also competed and lost to new tycoons in Manila and throughout the region - taking careful note of their winning attitudes, strategies and successes.
I’ll admit it, after getting thrown out of Manila with the election of Bill Clinton; it took me a while to get used to life without a driver, cook and maid. But the new tycoon bug stayed with me. I became a co-founder and CFO of Honolulu-based venture capital-backed Pacifica Group, founded Chartwell Pacific and serve as an advisor to the frontier private equity firm, Leopard Capital. I also joined the U.S. National Committee on Pacific Economic Cooperation, became a columnist with Forbes Asia, and penned three books on global and emerging market investing. I also keep in touch with and am constantly expanding my new tycoon network.
Profit from the New Tycoon Network
While my experience, travel and research is helpful in uncovering new tycoon opportunities, imagine this multiplied many times over.
This is the rationale for my private & confidential new tycoon network throughout the world. Many of them are focused on the Pacific Rim and emerging/frontier markets and a key benefit from this network is that not everyone thinks the same. This clash of opinions sharpens thinking and decision-making.
This intelligence network includes some who have risen up to the top levels of companies and governments. Some are leaders in private equity and investment banking in Central America, Eastern Europe, Japan, and Southeast Asia. Finally, there are those like me in the financial publishing & equity research business scouring the world for bargains and hidden gems across the world.
Some of my network is based in major financial centers like San Francisco, London, Hong Kong, Singapore and Tokyo and what I really prize are those contacts plugged into places like Santiago, Panama City, Jakarta, Saigon, Manila, Rangoon, Kuala Lumpur, Malacca, Melbourne and Taipei.
No question about it - there will be plenty of ways smart and savvy investors will be able to get a piece of this action. But approaching these new markets the right way is the key to success.
This is why it is so important to study and follow the success of new tycoons like the world's richest woman (mining magnate from Australia), Hong Kong's Li Ka-Shing, India's Ratan Tata, or Mexico's Carlos Slim – the richest man in the world.
Many of these new tycoons come from modest backgrounds - Li Ka-Shing had to leave school at age 14 to work 16 hours a day in a plastics factory and Slim is the son of Lebanese immigrants - but they share some powerful investment traits that you can follow.
I call this the New Tycoon Blueprint.
How the New Tycoons are Hitting Paydirt
This New Tycoon Blueprint is centered on investing in emerging blue chips.
The best way to describe an emerging blue chip is to contrast it with traditional blue chip stocks. Blue chip companies are huge, global, stable, mature companies based in Western markets with slow steady sales and profit growth plus decent dividends.
One famous blue chip is Johnson & Johnson (JNJ). Its international sales have tripled during the past decade but its stock has performed poorly with an average annual return of less than 1%. Blue chip Kraft (KFT) - a bundle of blockbuster brands like Jello, Maxwell House, Tang, Miracle Whip and Oreos - has done a bit better than JNJ. Kraft has 12 brands generating $1 billion each year and Tang is the most recent addition to this exclusive club. With all these killer brands aimed at emerging growth, Kraft is expected to grow revenue around 3% a year over the next three years. Not bad for a food giant.
Another example is giant Procter & Gamble with $84 billion in annual revenue. P&G's average annual growth over the last five years is less than 2% and it is losing market share in a majority of its businesses.
While having blue chips stocks like J&J, Kraft and Procter & Gamble in your portfolio may help you protect your wealth, you need to think a bit more boldly to put some sizzle into your portfolio and build real wealth.
You do this by following John Train’s advice in his book Preserving Capital:
“Be an adventurer; like the American of a century ago, not his clerkish descendant of today. You must think as a builder, a conqueror.”
You do this by investing in emerging blue chips that profit handsomely from the following advantages:
Emerging Blue Chip Advantage #1
durable home government backing = key regulatory advantages
Emerging Blue Chip Advantage #2
home court advantage & protected markets = much higher profit margins
Emerging Blue Chip Advantage #3
allied with global blue chip companies and local tycoons = clear competitive edge
Emerging Blue Chip Advantage #4
local inside knowledge in booming consumer markets = high growth
Emerging Blue Chip Advantage #5
lower costs & economies of scale = bigger profits
Emerging blue Chip Advantage #6
early stage of growth cycle, focused on fast growing consumer markets = sustainable high growth
Emerging Blue Chip Advantage #7
hidden off radar screen of Wall Street = opportunity for value entry point
Emerging Blue Chip Advantage #8
great balance sheets, 3-4% dividends, and same talented management of traditional blue chips
Emerging Blue Chip Advantage #9
substantial companies - the average market value of top 30 emerging consumer companies is $27 billion.
Emerging Blue Chip Advantage #10
operate in countries that avoid the high debt, high deficits and poor demographics that plague well developed countries.
Give Your Portfolio a Shot of Emerging Blue Chip Growth
Now, quite frankly, investing in these emerging blue chips is not for everyone. Yes, there is a bit more risk investing in the leading food company of South Korea, Mexico or Taiwan than investing in Kraft but the potential rewards are far, far, greater. Plus these tycoon blue chips offer you the great balance sheets, talented management and 3-4% dividend yields of traditional blue chips plus much higher growth and significant upside potential. And many of these companies are already considered blue chips in their own countries and are listed on U.S. stock exchanges.
They are not small companies by any means. The average market value of the top 30 emerging market consumer companies is $26.8 billion. Pacific Rim emerging markets also largely avoid the 3-D disease of high debt, high deficits and poor demographics that plague well developed countries. This is why Indonesia's debt is actually declining and Chile has a huge rainy day fund in place.
And remember, emerging markets are not at the fringe but at the heart of the global economy. According to the IMF, the total production of goods and services in emerging markets is on pace to exceed that of developed nations by 2013!
Just imagine investing in Johnson & Johnson stock of a century ago. This is how the new Forbes billionaire tycoons are building their fortunes at lightning speed while most investors keep falling behind.
Bottom line: having 20% of your global equity portfolio in 8-10 emerging blue chip stocks will help you outperform the market in a big way. You do this by picking the right tycoon emerging blue chips at the right time.
Here's a few examples.
#1 Emerging Blue Chip
The "U.S. Steel of Mexico" Highlights the New Global Manufacturing Powerhouse
A recent example of my strategy is a Pacific Rim country overlooked because of border drug violence - Mexico. These bad headlines have also produced a great time to find bargains as Carlos Slim – the richest man in the world - knows very well.
He really kick started his empire in the fire of the 1992 Mexican peso crisis. The key was his bargain basement purchase of the tobacco company Cigatam. This company gave Slim a big cash flow that he used to move into Mexico’s lucrative and highly regulated and, semi monopoly telecom business forming the base of his fortune.
Incredibly, companies controlled by Slim have captured 80% of Mexico’s telephone lines, 70% of the cell phone market, and account for an incredible 34% of the value of the country’s entire stock market. Slim’s stake in Telmex alone went from $1.48 billion to $8.24 billion.
Looking beyond telcoms, my view confirmed by intelligence from my tycoon network, highlights Mexico’s path to replacing China as the premier global manufacturing platform for selling into North and South American markets.
Why? China’s huge advantage in labor costs has evaporated.
In 2000, Mexico’s manufacturing wages were 240% higher than in China. Now they are dead even. Given all the logistical issues and transportation costs that come with shipping parts to China and then bringing the final product back you can easily see Mexico’s advantage.
80% of Mexico’s exports are manufactured goods and trade now represents 60% of GDP - a figure that has more than tripled since 1980. Mexican exports hit a record high in April of this year. This is why American, European, Japanese, South Korean and, yes, even China are falling over each other to invest in Mexican production facilities. One example is the recent opening of Italian tire maker Pirelli’s first ever plant in Mexico. Last year, Mexican exports of manufactured products topped $300 billion.
Always keep in mind Mexico’s geographical edge next to two huge markets and as a Pacific Rim country, it has ready access to all Asia-Pacific markets. And look at the big picture. While U.S. debt is approaching 90% of GDP, Mexico is at 27%. America’s budget deficit is 8.6% of GDP while Mexico is at 2.5%.
But the real key is that the Mexican Government sees fostering growth in manufacturing as a top priority to provide employment, political stability, and the carrot to attract significant levels of foreign investment that can supercharge its economy. While the United States is also seeing a revival in manufacturing, it benefits from this shift in Mexico’s favor for strategic and diplomatic reasons.
Late in 2011, I began to highlight Grupo Simec (SIM) as the best play on this trend.
Simec provides the finished steel that goes into manufacturing plants being built hand over fist by global companies taking advantage of Mexico’s edge. In 2011 sales were up 19%, operating income was up 123%. Sales within Mexico were up 33% as the company exports about half of its production. In 2012 and so far in 2013, its growth and profitability accelerated.
The stock is still trading below book value, 65% of sales and at only 8.4 times trailing earnings.
Grupo Simec (SIM) was up 93.25% in 2012 while the emerging market index was up only 14.2%.
#2 Emerging Blue Chip
Investing in the "Ford of India" at Economy Prices.
Another good example of my Emerging Blue Chip strategy is the "Ford of India" - Tata Motors (TTM). This company has had its ups and downs but I like its strategy of attacking the high and low end of auto markets. Tata was in rough shape late in 2011, trading at prices down 71% from its 2010 highs. The reasons were twofold.
First, the company had made some management mistakes and the much publicized and low priced Tata Nano was a big disappointment. Second, India's economy was slowing and many believed new car sales would drop sharply. Several high profile corruption cases and falling foreign investment in the country created a negative view of growth prospects.
The new tycoon network confirmed my conviction that while these challenges were substantial, the long-term story of India and its rising middle class was intact and that the company would rebound. This was a great time to get Tata on sale. It's latest quarter showed revenue growth of 29.3% and analysts in April revised earnings estimates for 2012 and 2013 upward, always a good sign.
Tata is re-launching its compact car (Indica eV2) for its rising consumer middle class with a bright new look and plenty of options while lowering its price. Meanwhile, in October it is releasing its fourth-generation Range Rover and also owns the prestigious Jaguar brand for global luxury consumers.
Tata was up 47.9% in 2012.
Tycoon Capitalist Confidential Report
A Look Behind The Best Tycoon Blue Chip for the Pacific Century
While Simec and Tata are great picks, I believe that my Stock of the Pacific Century has a much higher potential to score huge gains in a relatively short time. This industrial and infrastructure company, based in the Pacific Rim and trading on an U.S. stock exchange, is extremely well positioned to be the stock of the Pacific century for the following four reasons.
Strategic Importance & Favored Status:
I cannot think of a company more strategically placed at the heart of blue ocean growth providing key services tied to vital economic and security interests. In short, this company is clearly, “favored” by both its home government and the U.S. government. The company's three top markets mirror three high growth megatrends in the Pacific Rim making it perfectly positioned for rapid and sustained growth.
The country’s government fund owns about 20% of outstanding shares and its board of directors represents a blue chip assembly of elite executives and government leaders. The company’s services tie together nicely into the Pacific free trade initiatives I highlighted at the beginning of this report. In addition, the geopolitical pivot to the Pacific Rim gives this company great value due to its special expertise in a sensitive area of crucial security interest to the U.S. and its allies.
Strong Fundamentals & Momentum
The company is rapidly building its book of business worldwide and has a sterling balance sheet and a cash stockpile of $3 billion. It’s first half 2012 financial results highlight this growth with revenue up about 70% and earnings up roughly 80%. It’s stock is making a major move this year, up 21% year to date with the best yet to come. The stock also offers a current dividend yield over 3.8% and a five year dividend growth rate of nearly 20%.
Dominant Market Position & Significant Contracts in Pipeline
The company has a dominant 80% market share of its most important market. It also recently signed a series of substantial commercial contracts and a letter of intent agreement for $4 billion plus of business - equal to 25% of the company’s current market value. The signing of the construction contracts is pending so the clock is ticking for you to take action before these contracts hit headlines.
Attractive Valuation
Finally, this stock, which trades on a U.S. stock exchange, is trading at a valuation relative to earnings that is about half that of the S&P 500 index. I cannot understand why it is not trading at a premium to the S&P 500 given its growth record and prospects.
You need to get this stock into your global portfolio right now.
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May 2013
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.........and a secret market surging a staggering 814%
Wealth and tycoons are piling up faster in Singapore than anywhere in the world.
Investment assets have jumped an amazing 1,120% since 2000 putting this city-state on a pace to overtake Switzerland by 2020.
How is a country 1/5 the size of Rhode Island beating the pants off London, New York, Shanghai, and Zurich? I am convinced that secrets that created this new tycoon wealth will supercharge your portfolio - with the real potential of turning $10,000 into $57,612 over five years.
This was confirmed during my recent three-week Pacific investment tour. During this trip, I had fascinating meetings with tycoons, bankers and ambassadors. I visited the headquarters of a company so alluring I call it "the best stock for the Pacific Century". But the best meeting - bar none - was with the CEO of a leading private banking firm in Singapore - the financial capital of Southeast Asia. Here new tycoon clients are whisked into opulent conference rooms graced with stunning modern art plunking down a minimum of $20 million in cash just to open an account. That's real tycoon wealth.
A major source of new tycoon wealth comes from a remarkable secret investment strategy I will share with you in just a few minutes. This deceptively simple investment formula I call the New Tycoon Blueprint. This blueprint now targets a region at the ever-shifting center of diplomacy, international politics and capital flows.
But first, let me reassure you that you don't need any special background or education to follow the new tycoon blueprint. Many of you are better educated and grew up in much better circumstances compared to the humble beginnings of most new tycoons.
In fact, you'll need to unlearn some things because while you sitting in front of socialist economics professors, the new tycoons were plunging into the capitalist jungle - getting schooled and street smart.
This goes a long way to explain just how different new tycoons are from the gray executives that fill the canyons of Wall Street.
Executives are hesitant and conservative, tycoons are bold and opportunistic. Executives "allocate" capital to "maximize" profit, tycoons put capital to work to build enterprise, empires and wealth. Executives follow conventional wisdom, tycoons challenge it. Executive pawns react, tycoon kings anticipate 3-4 steps ahead ahead of the competition.
New Tycoon Secrets
So just what are the secrets of the new tycoons? Why does whatever they touch seem to turn to gold?
In short, they think more independently with the very best information and then act boldly.
Tycoons know that the difference between perception and reality = an opportunity to make a killing.
Here are just a few realities that the new tycoons understand and profit by:
New Tycoon Reality #1
The new billionaire tycoons grasp that wealth and capital, power and diplomacy are making a dramatic pivot to the Pacific Rim and emerging markets. Just as the 20th century was centered on the Atlantic, the 21st century belongs to the nations bordering the Pacific Ocean. But the perception that it's all about China is dead wrong.
New Tycoon Reality #2
Where the West sees chaos, turbulence and poverty, the new tycoons sense growth, profitable change and opportunity. They don't need a think tank to tell them about the rise of the middle class in the Pacific Rim and emerging markets - they see and profit from it every day.
New Tycoon Reality #3
While this economic pie of $6 trillion in new spending power is enormous, the new tycoons would laugh at investing in traditional blue chips like Procter & Gamble to capture this growth. They invest in the next blue chips with monopoly power to capture the biggest slice.
New Tycoon Reality #4
The new tycoons are real capitalists like the American tycoons of the early 20th century. But putting their own money on the line makes them more conservative than their bureaucratic, clerkish, gray descendants that manage Fortune 500 companies today.
New Tycoon Reality #5
They exploit and profit from the truth that emerging and frontier markets swing sharply between euphoria and despair. For example, a young Argentine walked into the office of George Soros in 1990 and convinced him to invest $10 million in Argentine real estate. Several years later, this contrarian gambit became $190 million and ir eventually turned into a fabulous $500 million real estate portfolio.
New Tycoon Reality #6
New tycoons look beyond the headlines that always mirror conventional wisdom. In fact, they love bad headlines because they scream opportunity and value.
New Tycoon Reality #7
New tycoon capitalists pay close attention to politics since they realize that shifts create opportunities and most countries are a blend of free markets and state capitalism.
New Tycoon #8
New tycoons are both street smart and sophisticated - looking beyond their home country/region for opportunities worldwide.
New Tycoon Reality #9
These new tycoons build their fortunes by paying very careful attention to price - investing in high potential opportunities only when they are "on sale". This minimizes downside risk and maximized upside potential.
New Tycoon Reality #10
Rather than just react, tycoons anticipate, thinking 3-4 steps ahead. This is the difference between you being a king and a pawn.
To sum up, the new tycoons know what is happening on the ground and beyond the headlines. They shrewdly and patiently invest in future blue chips at value prices. They are bucanneers rather than bureaucrats and they target the world's rising consumer class.
This is why they invest in companies like the "U.S. Steel of Mexico" which rocketed 96.3% in 2012 and the "Ford of India", up 70.4% during the past year - beating the emerging market index by up to a 10-1 margin.
And while you may not be a tycoon yet, I will soon give you a blueprint to invest like one.
This is the same blueprint I used to carefully select my Stock for the Pacific Century recommendation. Although this new blue chip stock trades on a U.S. exchange, it is virtually unknown, priced at a deep discount and perfectly positioned to capture blue ocean growth.
Are You Ready to Invest Like a New Tycoon?
Now, quite frankly, following the new tycoon blueprint is not for everyone.
Yes, there is a bit more risk investing in the leading food company of Singapore, Chile, Panama, Indonesia, Malaysia, Mexico, or Taiwan than investing in Kraft but the potential rewards are far, far, greater.
In short, just imagine the opportunity right now to invest in the Johnson & Johnson stock of a century ago. This is how the new tycoons are building their fortunes at lightning speed while most investors keep falling further behind.
You too can profit greatly by investing in the JP Morgan of Singapore, the Heinz of Malaysia, the Kraft of Thailand, the Google of Russia, the Starbucks of Taiwan, the Chevron of Indonesia and the Jet Blue of Panama.
This is your opportunity - let me tell you how to seize it.
First, you'll need to start thinking differently and getting ahead of the crowd. You need to challenge conventional wisdom since opportunity is the difference between perception and reality. You also need first-class investment intelligence on where global financial and political capital is moving. You need to find, as early as possible, the quality companies best positioned to capture this growth.
But I'm getting ahead of myself. We need to start at the very beginning of the creation of the Pacific century and then drill down to the New Tycoon Blueprint and some stock picks.
The Wind at the Back of the New Tycoons: Three Monster Trade Pacts
Although they don't pay much attention to it, the new tycoons are definitely profiting from a wave of Pacific free trade deals .
For example, the free trade pact between the Southeast Asian regional grouping (ASEAN) and China (ASEAN-China Free Trade Area), took effect in January 2010. By the end of that year, ASEAN exports to China had leapt 54% and overall trade between these countries jumped 47%. This free trade area has become the third largest in the world behind the European Community and North American Free Trade Area. More than 7,000 products trade at zero tariffs.
The next move is a work in progress by China's prime competitors - led by the United States. The leaders of the ten Trans-Pacific Partnership countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Japan, and the United States are negotiating an ambitious 21st century Trans-Pacific Partnership (TPP) agreement that will supercharge trade and investment in the Pacific Rim.
These nine countries represent 55% of the world's economic output. Taiwan and the Philippines have indicated interest in joining the group. This agreement will also boost America's stake in this vital region. U.S. goods exports to the broader Asia-Pacific totaled $775 billion in 2010, a 25% increase over 2009 and equal to 61% of total U.S. goods exports to the world.
Then just last November, negotiations began on a massive ASEAN+6 a free trade zone between India, China, Japan, South Korea, Australia, New Zealand and the ten countries of Southeast Asia. This will create a $17 trillion super free trade zone larger than NAFTA.
When these last three trade accords are signed, the surge in investment and trade will benefit many Pacific Rim countries and tycoons but one region will reap the biggest harvest of profits.
The Sweet Spot & Cockpit of the Pacific Century
While the perception has been that Asia is all about China and India - the reality is that Southeast Asia has left both these giants in the dust. The timing is right for investors like you to capture a piece of this booming region - just like the Scottish taipan tycoons such as Jardine and Matheson did during the 19th century.
Located south of China and east of India, the booming Southeast Asian region is often overlooked by even the most sophisticated investors. Yet it represents ten countries with a population of 620 million (10% of the world's population) and an economic output of $2.4 trillion. The region's economic output is up 170% over the last decade. It has a youthful population with 70% under the age of 30 years old.
Over the past three years, Southeast Asian stock markets have outperformed China and India combined by a whopping 300%.
In the first quarter of 2013 according to the Financial Times, Southeast Asian companies raised $1.9 billion of new capital through IPOs, 30% more than Chinese companies including Shanghai and Hong Kong!
Indonesia is up 814% over the past decade - beating China by 706%!
Indonesia has been one of my favorites for quite some time. Three times the size of Texas, Indonesia is a democracy with the fourth largest population in the world. The country is on a roll fueled by much better fiscal policies. It is the only country in the G20 (largest 20 economies in the world) to have declining government debt/GDP and also has a balanced budget.
All this led to an upgrade by Standard & Poor’s and Indonesian government bonds are now rated “investment grade”. The World Bank reports that Indonesia has the planet’s fastest growing middle class and they are a savvy group. Indonesia represents the world’s third largest user of Facebook behind only the U.S. and the UK.
This country was totally ignored in the 1980s and 1990s. But now the wall of capital washing over this sweetspot has turned it into the best market in the Pacific Rim. The Boston Consulting Group just released a special report on Indonesia; "Asia's Next Big Opportunity" which projects its middle and affluent class growing from 74 million today to 141 million by 2020. This is one reason its stock market is up a staggering 814% over the last decade while China is up only 120%.
You can profit by Indonesia’s rising prosperity by investing in companies like Ace Hardware Indonesia. Ace is a large holding of the Indonesia Fund (IF) is up over 400% since 2009 and over the last decade, its market has had an average annual return of 25%.
There is much more. Sitting astride the biggest trade routes in the world and the two busiest ports, Hong Kong and Singapore. The oil that passes through the Straits of Malacca is three times that which goes through the Suez Canal and fifteen times the volume that passes through the Panama Canal.
And by the end of 2015, the ten countries that make up Southeast Asia will be joined as a common market fueling another surge in trade and investment flows.
And like two turbine engines powering a jet plane, the Singapore and Hong Kong markets are at the leading edge of these capital flows. Together with Australia, these three markets always grab the top three rankings in the Wall Street Journal's annual Index of Economic Freedom and this means that capital and property rights are respected and protected.
In many respects, Singapore is the “Switzerland of Asia” boasting the world's biggest budget surplus relative to economic output. Established by Sir Stamford Raffles in 1819 as an open port to offset Dutch supremacy, it is only one-fifth the size of Rhode Island and three times the size of Washington, D.C.. Nevertheless, it is the most strategically important global trading, finance and service nexus in Asia. The trade that flows through Singapore is worth a staggering 400% of its GDP.
Singapore is the busiest port in Asia, situated next to a vital trading channel, the Straits of Malacca through which 37% of world trade passes. It is one of only seven countries in the world to enjoy an AAA credit rating. Surprisingly, some firms are moving manufacturing centers from China to high-cost Singapore due to the high quality of its infrastructure, logistics and laws protecting intellectual property.
Then there is Malaysia - a solid middle-income country offering investors many of the attributes of its southern neighbor, Singapore, with the added benefit of natural resources and lower wage levels. Malaysia is a constitutional monarchy a bit larger than New Mexico. Rich in natural resources and a natural gas and oil exporter, it offers investors an economic environment of low inflation and debt. Although palm oil, tin, petroleum, copper, iron ore and other commodities are an important part of the Malaysian story, it has a well-diversified economy.
Thailand has done even better with its economy tripling over the past decade without accounting for inflation.
And don't forget that Vietnam’s ace in the hole is that its manufacturing wage rates are less than 1/3 that of China’s. While its per capita GDP has been steadily climbing, it has a very long way to go to catch up to countries like Singapore and Malaysia. The same goes for the Philippines which has cut its sovereign debt in half and was the world's top performing market in 2012.
Taiwan, Hong Kong and even Australia and New Zealand are also considered by many to be part of this bustling region. And why not - they certainly play key roles in supporting and benefiting this region of growth and opportunity.
I even keep a careful eye on some exotic hidden markets such as Burma, a country in transition to ending 50 years of economic and political isolation. Burma is of course rich in oil, gas and timber but it offers investors much more. The size of France and the United Kingdom together with 58 million people, it boasts 1,240 miles of coastline and 600 undeveloped tropical islands. Its 2,000 pagodas and other historical sites will make a high priority tourist destination for jetsetters. Burma will over time close the gap with neighboring Thailand. Thailand now has an economy ten times bigger and 14 million annual tourists compared to a paltry 300,000 for Burma.
And let’s not write off Japan which, despite a disappointing economy, is chock full of very cheap growth companies selling into rising Pacific markets. A weaker yen has boosted the shares of big exporters and its stock market is up 30% since last November. One of my past picks, up 28% in two months, was Fanuc (FANUY.PK) a factory automation company that has robots making robots.
The New Tycoon Pacific Rim - Beyond Asia
The new tycoons realize that the Pacific Rim reaches well beyond Asia and includes Pacific countries such as the United States, New Zealand, Australia, Mexico and Chile.
For example, one of my recent picks, which I believe will be the next Wal-Mart, is an American firm especially active in Central American markets and a stock that has more than doubled over the past year.
It might surprise you that Columbia’s stock market is the best performing market of the last decade with an average annual return over 30%. Rich in natural resources such as oil, coal, and tin, the country has a growing consumer class and Bogota has a larger population than Chicago.
Panama is quickly becoming the “Singapore of Latin America” with world-class financial and communication infrastructure and companies. The country has averaged an 8% growth rate over the past five years fueled by a construction and investment boom. The project to double the capacity of the Panama Canal will keep the ball rolling.
Chile’s 2,653-mile Pacific coastline highlights the county’s export prowess in natural resources such as copper and agriculture products like fruit, wine and vegetables. Chile also has a strong balance sheet with low debt, a balanced budget and an ample rainy day fund.
Companies from all these countries are well positioned to profit from the Pacific century.
From Milwaukee to Manila
Growing up in Milwaukee with six siblings, all indications were that I would be a conventional suit and tie man.
But then I went to study in Japan while at the University of Wisconsin. This year at Sophia University in Tokyo led to a degree in Oriental studies and economics and then it was on to the Fletcher School of Law & Diplomacy. My first job was as a banker with First Bank Boston in London and then heading up its Japan and South Korea banking group.
Next, was a stint as a Vice President with Robert W. Baird advising banks, life insurance companies and pension funds in Tokyo, Hong Kong and Sydney and picking stocks for global hedge fund titan Julian Robertson of Tiger Management.
Then a stint meeting the powerbrokers of Washington where I was an advisor on Asian trade and investment with both the U.S. Senate Finance Committee and the U.S. Treasury. This led to an appointment by Treasury Secretary Nicholas Brady to represent America on the executive board of directors at the Asian Bank in Manila, Philippines.
This was a breakthrough experience.
From this post, I met many tycoons and budding tycoons while leading investment missions to Thailand, Singapore, Nepal, Mongolia, Papua New Guinea, China, Hong Kong, Canada, Vietnam, Indonesia, South Korea, Fiji, Taiwan and Australia. Perhaps the most satisfying part of my post in Manila was helping American firms snag new business in the region. I played a key role in financing a $110 million power project in the Philippines and helped another win a $45 million deal to own and manage a port and airport in Malaysia. We also launched a series of mutual, private equity and venture capital funds firms so private capital could play a leading role in promoting growth. I also competed and lost to new tycoons in Manila and throughout the region - taking careful note of their winning attitudes, strategies and successes.
I’ll admit it, after getting thrown out of Manila with the election of Bill Clinton; it took me a while to get used to life without a driver, cook and maid. But the new tycoon bug stayed with me. I became a co-founder and CFO of Honolulu-based venture capital-backed Pacifica Group, founded Chartwell Pacific and serve as an advisor to the frontier private equity firm, Leopard Capital. I also joined the U.S. National Committee on Pacific Economic Cooperation, became a columnist with Forbes Asia, and penned three books on global and emerging market investing. I also keep in touch with and am constantly expanding my new tycoon network.
Profit from the New Tycoon Network
While my experience, travel and research is helpful in uncovering new tycoon opportunities, imagine this multiplied many times over.
This is the rationale for my private & confidential new tycoon network throughout the world. Many of them are focused on the Pacific Rim and emerging/frontier markets and a key benefit from this network is that not everyone thinks the same. This clash of opinions sharpens thinking and decision-making.
This intelligence network includes some who have risen up to the top levels of companies and governments. Some are leaders in private equity and investment banking in Central America, Eastern Europe, Japan, and Southeast Asia. Finally, there are those like me in the financial publishing & equity research business scouring the world for bargains and hidden gems across the world.
Some of my network is based in major financial centers like San Francisco, London, Hong Kong, Singapore and Tokyo and what I really prize are those contacts plugged into places like Santiago, Panama City, Jakarta, Saigon, Manila, Rangoon, Kuala Lumpur, Malacca, Melbourne and Taipei.
No question about it - there will be plenty of ways smart and savvy investors will be able to get a piece of this action. But approaching these new markets the right way is the key to success.
This is why it is so important to study and follow the success of new tycoons like the world's richest woman (mining magnate from Australia), Hong Kong's Li Ka-Shing, India's Ratan Tata, or Mexico's Carlos Slim – the richest man in the world.
Many of these new tycoons come from modest backgrounds - Li Ka-Shing had to leave school at age 14 to work 16 hours a day in a plastics factory and Slim is the son of Lebanese immigrants - but they share some powerful investment traits that you can follow.
I call this the New Tycoon Blueprint.
How the New Tycoons are Hitting Paydirt
This New Tycoon Blueprint is centered on investing in emerging blue chips.
The best way to describe an emerging blue chip is to contrast it with traditional blue chip stocks. Blue chip companies are huge, global, stable, mature companies based in Western markets with slow steady sales and profit growth plus decent dividends.
One famous blue chip is Johnson & Johnson (JNJ). Its international sales have tripled during the past decade but its stock has performed poorly with an average annual return of less than 1%. Blue chip Kraft (KFT) - a bundle of blockbuster brands like Jello, Maxwell House, Tang, Miracle Whip and Oreos - has done a bit better than JNJ. Kraft has 12 brands generating $1 billion each year and Tang is the most recent addition to this exclusive club. With all these killer brands aimed at emerging growth, Kraft is expected to grow revenue around 3% a year over the next three years. Not bad for a food giant.
Another example is giant Procter & Gamble with $84 billion in annual revenue. P&G's average annual growth over the last five years is less than 2% and it is losing market share in a majority of its businesses.
While having blue chips stocks like J&J, Kraft and Procter & Gamble in your portfolio may help you protect your wealth, you need to think a bit more boldly to put some sizzle into your portfolio and build real wealth.
You do this by following John Train’s advice in his book Preserving Capital:
“Be an adventurer; like the American of a century ago, not his clerkish descendant of today. You must think as a builder, a conqueror.”
You do this by investing in emerging blue chips that profit handsomely from the following advantages:
Emerging Blue Chip Advantage #1
durable home government backing = key regulatory advantages
Emerging Blue Chip Advantage #2
home court advantage & protected markets = much higher profit margins
Emerging Blue Chip Advantage #3
allied with global blue chip companies and local tycoons = clear competitive edge
Emerging Blue Chip Advantage #4
local inside knowledge in booming consumer markets = high growth
Emerging Blue Chip Advantage #5
lower costs & economies of scale = bigger profits
Emerging blue Chip Advantage #6
early stage of growth cycle, focused on fast growing consumer markets = sustainable high growth
Emerging Blue Chip Advantage #7
hidden off radar screen of Wall Street = opportunity for value entry point
Emerging Blue Chip Advantage #8
great balance sheets, 3-4% dividends, and same talented management of traditional blue chips
Emerging Blue Chip Advantage #9
substantial companies - the average market value of top 30 emerging consumer companies is $27 billion.
Emerging Blue Chip Advantage #10
operate in countries that avoid the high debt, high deficits and poor demographics that plague well developed countries.
Give Your Portfolio a Shot of Emerging Blue Chip Growth
Now, quite frankly, investing in these emerging blue chips is not for everyone. Yes, there is a bit more risk investing in the leading food company of South Korea, Mexico or Taiwan than investing in Kraft but the potential rewards are far, far, greater. Plus these tycoon blue chips offer you the great balance sheets, talented management and 3-4% dividend yields of traditional blue chips plus much higher growth and significant upside potential. And many of these companies are already considered blue chips in their own countries and are listed on U.S. stock exchanges.
They are not small companies by any means. The average market value of the top 30 emerging market consumer companies is $26.8 billion. Pacific Rim emerging markets also largely avoid the 3-D disease of high debt, high deficits and poor demographics that plague well developed countries. This is why Indonesia's debt is actually declining and Chile has a huge rainy day fund in place.
And remember, emerging markets are not at the fringe but at the heart of the global economy. According to the IMF, the total production of goods and services in emerging markets is on pace to exceed that of developed nations by 2013!
Just imagine investing in Johnson & Johnson stock of a century ago. This is how the new Forbes billionaire tycoons are building their fortunes at lightning speed while most investors keep falling behind.
Bottom line: having 20% of your global equity portfolio in 8-10 emerging blue chip stocks will help you outperform the market in a big way. You do this by picking the right tycoon emerging blue chips at the right time.
Here's a few examples.
#1 Emerging Blue Chip
The "U.S. Steel of Mexico" Highlights the New Global Manufacturing Powerhouse
A recent example of my strategy is a Pacific Rim country overlooked because of border drug violence - Mexico. These bad headlines have also produced a great time to find bargains as Carlos Slim – the richest man in the world - knows very well.
He really kick started his empire in the fire of the 1992 Mexican peso crisis. The key was his bargain basement purchase of the tobacco company Cigatam. This company gave Slim a big cash flow that he used to move into Mexico’s lucrative and highly regulated and, semi monopoly telecom business forming the base of his fortune.
Incredibly, companies controlled by Slim have captured 80% of Mexico’s telephone lines, 70% of the cell phone market, and account for an incredible 34% of the value of the country’s entire stock market. Slim’s stake in Telmex alone went from $1.48 billion to $8.24 billion.
Looking beyond telcoms, my view confirmed by intelligence from my tycoon network, highlights Mexico’s path to replacing China as the premier global manufacturing platform for selling into North and South American markets.
Why? China’s huge advantage in labor costs has evaporated.
In 2000, Mexico’s manufacturing wages were 240% higher than in China. Now they are dead even. Given all the logistical issues and transportation costs that come with shipping parts to China and then bringing the final product back you can easily see Mexico’s advantage.
80% of Mexico’s exports are manufactured goods and trade now represents 60% of GDP - a figure that has more than tripled since 1980. Mexican exports hit a record high in April of this year. This is why American, European, Japanese, South Korean and, yes, even China are falling over each other to invest in Mexican production facilities. One example is the recent opening of Italian tire maker Pirelli’s first ever plant in Mexico. Last year, Mexican exports of manufactured products topped $300 billion.
Always keep in mind Mexico’s geographical edge next to two huge markets and as a Pacific Rim country, it has ready access to all Asia-Pacific markets. And look at the big picture. While U.S. debt is approaching 90% of GDP, Mexico is at 27%. America’s budget deficit is 8.6% of GDP while Mexico is at 2.5%.
But the real key is that the Mexican Government sees fostering growth in manufacturing as a top priority to provide employment, political stability, and the carrot to attract significant levels of foreign investment that can supercharge its economy. While the United States is also seeing a revival in manufacturing, it benefits from this shift in Mexico’s favor for strategic and diplomatic reasons.
Late in 2011, I began to highlight Grupo Simec (SIM) as the best play on this trend.
Simec provides the finished steel that goes into manufacturing plants being built hand over fist by global companies taking advantage of Mexico’s edge. In 2011 sales were up 19%, operating income was up 123%. Sales within Mexico were up 33% as the company exports about half of its production. In 2012 and so far in 2013, its growth and profitability accelerated.
The stock is still trading below book value, 65% of sales and at only 8.4 times trailing earnings.
Grupo Simec (SIM) was up 93.25% in 2012 while the emerging market index was up only 14.2%.
#2 Emerging Blue Chip
Investing in the "Ford of India" at Economy Prices.
Another good example of my Emerging Blue Chip strategy is the "Ford of India" - Tata Motors (TTM). This company has had its ups and downs but I like its strategy of attacking the high and low end of auto markets. Tata was in rough shape late in 2011, trading at prices down 71% from its 2010 highs. The reasons were twofold.
First, the company had made some management mistakes and the much publicized and low priced Tata Nano was a big disappointment. Second, India's economy was slowing and many believed new car sales would drop sharply. Several high profile corruption cases and falling foreign investment in the country created a negative view of growth prospects.
The new tycoon network confirmed my conviction that while these challenges were substantial, the long-term story of India and its rising middle class was intact and that the company would rebound. This was a great time to get Tata on sale. It's latest quarter showed revenue growth of 29.3% and analysts in April revised earnings estimates for 2012 and 2013 upward, always a good sign.
Tata is re-launching its compact car (Indica eV2) for its rising consumer middle class with a bright new look and plenty of options while lowering its price. Meanwhile, in October it is releasing its fourth-generation Range Rover and also owns the prestigious Jaguar brand for global luxury consumers.
Tata was up 47.9% in 2012.
Tycoon Capitalist Confidential Report
A Look Behind The Best Tycoon Blue Chip for the Pacific Century
While Simec and Tata are great picks, I believe that my Stock of the Pacific Century has a much higher potential to score huge gains in a relatively short time. This industrial and infrastructure company, based in the Pacific Rim and trading on an U.S. stock exchange, is extremely well positioned to be the stock of the Pacific century for the following four reasons.
Strategic Importance & Favored Status:
I cannot think of a company more strategically placed at the heart of blue ocean growth providing key services tied to vital economic and security interests. In short, this company is clearly, “favored” by both its home government and the U.S. government. The company's three top markets mirror three high growth megatrends in the Pacific Rim making it perfectly positioned for rapid and sustained growth.
The country’s government fund owns about 20% of outstanding shares and its board of directors represents a blue chip assembly of elite executives and government leaders. The company’s services tie together nicely into the Pacific free trade initiatives I highlighted at the beginning of this report. In addition, the geopolitical pivot to the Pacific Rim gives this company great value due to its special expertise in a sensitive area of crucial security interest to the U.S. and its allies.
Strong Fundamentals & Momentum
The company is rapidly building its book of business worldwide and has a sterling balance sheet and a cash stockpile of $3 billion. It’s first half 2012 financial results highlight this growth with revenue up about 70% and earnings up roughly 80%. It’s stock is making a major move this year, up 21% year to date with the best yet to come. The stock also offers a current dividend yield over 3.8% and a five year dividend growth rate of nearly 20%.
Dominant Market Position & Significant Contracts in Pipeline
The company has a dominant 80% market share of its most important market. It also recently signed a series of substantial commercial contracts and a letter of intent agreement for $4 billion plus of business - equal to 25% of the company’s current market value. The signing of the construction contracts is pending so the clock is ticking for you to take action before these contracts hit headlines.
Attractive Valuation
Finally, this stock, which trades on a U.S. stock exchange, is trading at a valuation relative to earnings that is about half that of the S&P 500 index. I cannot understand why it is not trading at a premium to the S&P 500 given its growth record and prospects.
You need to get this stock into your global portfolio right now.
Thanks for your patience, we have covered a lot of ground together. Now let's finally get to your invitation to become a member of Tycoon Strategist.
The Perks that go with being a Member of Tycoon Capitalist
You will be privy to my very best ideas and the investment intelligence from my personal network.
- You will receive an annual membership to Tycoon Capitalist ($1,995 value) giving you an inside track on the next tycoon blue chip stocks we uncover based in emerging markets and the Pacific Rim - not just in Southeast Asia. Our last three picks were up 48.2%, 37.1% and 20.4%.
- From time to time, special reports such as The Best Emerging Blue Chip for the Pacific Century ($200 value)
- Invitations to select international investment trips in Europe, Asia and Latin America.
- We will from time to time introduce you to special opportunities such as a frontier markets fund manager with a portfolio trading at just 5.9 times earnings, an average dividend yield of 5.5% and a return of equity of 22%.
- Because we have no investment committees or bureaucracy, a great idea can go out to you immediately rather than in a few days or weeks.
- Finally, because our membership is kept small, from time to time I can recommend a stock that is thinly traded as well as special opportunities for accredited investors.
I will also send you email messages between issues with breaking updates and timely behind the scenes intelligence on key political and economic trends and what they mean for portfolio.
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But I realize that you may still be a bit skeptical. That we have to prove our worth.
So let me offer you a six month trial membership for just $495 and I'll lock in this rate going forward.
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LEGAL DISCLAIMER: This work is based on current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. Chartwell Partners, Inc. expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. And all Chartwell Partners (and affiliated companies), employees, and agents must wait 24 hours after an initial trade recommendation is published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation.
May 2013
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