Some surprising facts for you to wonder about over Christmas:
- Who would have thought that the best performer in the FTSE 100 would be Lloyds in the past year. Up 80%.
- You would have known Aberdeen Asset Management would be up there if you followed my newsletter and blog – it is up 65% this year.
- Would you have bet RBS would be up 50% or that Barclays would double in size? Well Barclays is a bad example. They are still at 1996 price levels. Buying Barclays shares is like being in a time machine.
- With High St bankruptcies would you have bet on Next – now at £37 and up 35% this year. I remember as a student buying some at 22p!
- Again if you looked at my blog during the year you would not be surprised I have liked Babcock and Wolseley this year – both up 32% so far.
- Diageo and advertising agency WPP I continue to like into next year – also up 30%.
- Who stinks? BG Group is down 25%. Morrison’s down 20%. And Anglo American and Tesco all down over 15% this year. If they return next year to regain the ground they lost this year you will make 20% return. If they regain half that ground you are still up 10%. I could live with that.
- Vodafone annoys me. Charge me a fortune and still stagger at 1998 levels. But I bet you any money over the next two years it will at some point be up 20% from today’s value. And when it is – sell it!
And so here is a strategy. Find the companies which have been in the FTSE 100 for the past 10 years – so we know they are survivors. Then see which have lost more than 15% this year. Look to see if they have been about 20% higher than today’s price at some point in the past two years. Then work on the basis they will recover that at some point in the next two year – else you end up with a load of survivors anyway, but potentially make 20% on your money.
You know why people like property over shares. Property is leveraged so makes returns quicker – except at the start of a credit crunch. The same thing in shares is to ask your broker for a margin account – so if the above shares do that you make 40% say instead.
But beware – you could end up with holding sometime, like with property, in negative equity. But at least Vodafone pays a dividend.
WHAT TO WATCH: Retail sales in the U.S. probably climbed in November on rebounding demand for automobiles, 8:30 a.m. U.S. producer prices probably fell 0.5 percent after a 0.2 percent drop the prior month, 8:30 a.m. European finance ministers agreed to put the ECB in charge of all euro-area lenders. Chile will probably leave its key interest rate unchanged at 5 percent for the 11th straight month, 4 p.m. IMF Managing Director Christine Lagarde speaks in Chile, 8:30 a.m. The Swiss central bank pledged to uphold its 15-month defense of the franc. The Philippines kept its benchmark borrowing rate at 3.5 percent.
ECONOMICS: U.S. jobless claims, 8:30 a.m. Bloomberg U.S. weekly consumer comfort index, 9:45 a.m. U.S. business inventories may have grown 0.4 percent in October, compared with a 0.7 percent gain a month prior, 10 a.m. Spain sold 2.02 billion euros ($2.64 billion) of debt as the Treasury seeks a funding buffer for next year.
GOVERNMENT: Euro-region finance ministers are set to approve a 34.4 billion-euro ($45 billion) loan disbursement to Greece after German Chancellor Angela Merkel endorsed the country’s debt-reduction efforts.
MARKETS: The yen dropped to a more than eight-month low. South Korea’s won strengthened to a 15-month high. Commodities declined. Treasury 30-year yields climbed to the highest level in five weeks. German bunds erased a decline. U.S. stock futures declined, indicating the S&P 500 Index will retreat from a seven-week high.
Also in today’s issue:
Joseph Brusuelas takes a look at the Fed’s adoption of the ‘Evans rule,’ which links stimulus to specific jobs and inflation targets.
Bloomberg Rankings lists the top forecasters of this morning’s advance retail sales report.
Darius Kowalczyk of Credit Agricole says China’s growth momentum may peak soon.
Niraj Shah takes a closer look at the economy of London, which may be decoupling from the rest of the U.K.
Ira Jersey talks to Tom Keene about negative real bond yields.