“I Only Invest in Stocks That Go Up” – Mark Twain

Lance Spicer, Editor - Trident Confidential, 27 Jul 2011, 12:42 PM

There’s something to be said for one of Mr Twain’s quips. Investors should be focusing on stocks with sales and profits that only go up. It’s the surefire way to make money in the stock market.

Since the Global Financial Crisis began in 2007, the world has changed. World growth prior to then had been pretty much driven by the developed world and this was fuelled in part by borrowing and leverage. This increased demand for products and services beyond what was actually being earned by people. In effect we were overspending and using debt to do it. Now, we have all been taught a lesson in overspending, as home owners in the US will attest, and since the GFC we have all become a little “debt shy”.

Most people these days are paying down debt and saving money, and while this is prudent and sensible, it does give investors a headache. Without spending, there is no GDP growth and that is what is ailing stock markets around the world. We had gotten used to growth travelling along at a fair old clip and now it’s slow and sluggish, as people in developed countries “deleverage”. This may go on for a couple of years yet until we again feel comfortable about spending. This slower growth will obviously give us smaller returns on the stock market, and on all investments for that matter. Interest rates and bond yields will also remain historically low as we reduce debt.

So, we have a dilemma – we all want to retire some day and our retirement funds are still looking sick for the most part and without any growth they’ll probably stay that way.

Prepared for a rough retirement, or is there a solution?

Well, there is. It’s a matter of finding investments, despite the world growth slump, that are still growing at a rate of knots. What I’m talking about are companies that are increasing sales and profits, and whose share prices are also rising or set to rise. These are companies that are exposed to the one place growth is being found – emerging markets. Now, I’m not talking about dodgy Chinese listed companies here, or Australian dollar constrained mining companies who on the whole, are doing it tough on the profit growth front, but corporations who are experiencing growth in sales and profits due to emerging markets buying their products and services. This trend of growth in emerging markets is set to stay with us for possibly a decade or longer, and as an investor you need to tap into it.

As an example, Apple’s share price hit an all time high this week as it’s sales and earnings keep increasing even in these tough economic conditions. This is due to the fact that they no longer depend just on developed countries for their income, but increasingly emerging economies as well. This is where you should be investing right now – in companies undergoing significant growth due to emerging economies and in many cases, also beating competitors in the developed economies with better products and services.

While overall the stock market has been lacklustre this year, there are companies doing well, and while many of them don’t have the profile of say Apple, they do offer the same advantages. Investors are only now realising that these companies are doing very well, and it won’t be too long before their share prices start rapidly increasing.

Our New Pick This Week is estimated to Rise 80% in the next year.

Just this week, I reported on the 14 stocks that have announced earnings this month that Trident Subscribers have positions in, and 12 of them have beaten sales and profit estimates significantly, and all 14 have raised profit and sales estimates for the next quarter. These are all companies doing really well.

This week’s issue of Trident Confidential features a great company that you all would have heard of that’s growing very quickly despite it’s size and I estimate that it’s stock price could increase over 80% in the next year, and even then it will be undervalued based on fundamentals. This company is almost a monopoly and even though times have been tough, it has boosted sales, margins and profits. It is growing at 26%pa, yet only has a forward Price to Earnings ratio of 14, no debt and mountains of cash. What’s more, it’s expanding it’s range of services and many in it’s industry think they’ll also gain “almost monopoly” status in these services too. This is a very unique and exciting company.

Click here to find out what it is