Yesterday turned out to be a good day for stocks, just as we thought it would. The Australian share market closed up 36.5 points.
But it wasn’t the first good day for stocks over the past 12 months.
Recently released research shows that the whole of 2013 was good for stocks…just as we told you it would be.
Now of course we’re looking ahead to this year’s stock market performance. Will it be as good?
It could be. There’s even a chance it could be better than last year…
A research report from superannuation consultants Chant West revealed the performance of super funds in 2013.
The Australian reported:
‘Superannuation funds posted their best performance on average for the past 20 calendar years in 2013, according to new figures.
‘Super consultants Chant West said Australia’s most common superannuation funds finished calendar 2013 with a return of 17.5 per cent for the year, up from 12.8 per cent in 2012.
‘It’s the second highest return since the introduction of compulsory super in 1992, bettered only by the 23.9 per cent return in calendar 1993.‘
We’ve said it a million times already, but we’ll say it again – so much for the idea that rising interest rates would kill stocks last year. We told you to ignore those stories at the time. We bet you’re glad you did.
A quick stocktake of the 31 stocks we tipped in Australian Small-Cap Investigator and Revolutionary Tech Investor last year shows that 23 are currently up, one is flat and seven are down.
Importantly, the average result across all those stocks is a gain of 24.8%.
Rising Japanese Interest Rates? Stocks Still Went Up
That’s a good return by anyone’s standards. Even if you bought into the S&P/ASX 200 index at the low point for the year on 25 June, you couldn’t have beat that return. That would have only made you a 14.2% return.
That’s the beauty of investing in individual stocks. Sure, it can be risky, because there’s always a chance you’ll pick a dud stock. But if you spread your money across a small selection of carefully researched stocks (don’t pick too many, or you’ll just get index returns) your winners should more than beat your losers.
So, there’s your confirmation. Despite the wailing about China’s slowing economy and the supposed disaster of rising interest rates in Japan, guess what?
And not only did they go up, but they helped retirement savers build the best gains in 20 years.
Now, some folks will say that’s all well and good with the benefit of hindsight. But it’s not hindsight. If you’ve read Money Morning for the past year you’ll know we told you to ignore the shrill cries about a crashing market.
We told you to buy stocks on the cheap, before they went higher.
But that, as the saying goes, is history. What about the future?
Well, it seems that finally other folks are starting to jump on the ‘buy stocks’ bandwagon.
Big Bonus on Their Minds
A report from Bloomberg yesterday noted that:
‘International investors are the most upbeat about the global economy that at any time in almost five years, buoyed by the US-led revival of industrial nations, according to the Bloomberg Global Poll.
‘On the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, 59 percent of Bloomberg subscribers surveyed last week said the economic outlook is improving. That’s up from 33 percent in November and marks the most optimistic result since the poll began in July 2009.‘
This is the kind of news that gives us more confidence in our call that the stock market is heading for another bumper year. If so, it would help push the market towards our 7,000-point target for 2015.
But doubtless the Bloomberg report will have the bubble watchers up in arms again. They’ll likely claim this is another ‘top of the market’ sign.
Naturally, we’ll argue that it’s not at all. Bloomberg surveys professional investors, including those at the big financial institutions. These aren’t the mug retail investors who arrive to the party too late, just as the market is about to turn.
These are the guys (and gals) who arrive just as things are getting exciting. You can bet your bottom dollar that a bunch of these investors missed out on the gains last year.
They now regret it. And in a world where returns against the benchmark index mean everything (and by everything we mean their bonuses depend on it), they’ll want to make sure they aren’t left behind for a second year running.
This is another reason why we’re convinced stocks are heading for a great year.
The Best Result for 20 Years
Of course, it’s all well and good to bang on about another great year for stocks, but where should you put your money?
We’ve got two or three (actually, a few more than that) ideas in Australian Small-Cap Investigator.
<Small-cap analyst Tim Dohrmann wrote to subscribers last week filling them in on a new 'Turbo Cap' stock that he says has a bright future. We agree.
A ‘Turbo Cap’ stock is simply a small-cap stock that’s profitable and that either pays a dividend, is about to pay a dividend, or is on the verge of raising its dividend.
We call it a ‘Turbo Cap’ because in this current market, where investors are searching for growth and dividends, a company that can increase its dividend payout can reward investors with capital gains and a higher income stream.
Most mainstream analysts and investors seem to think the hunt for yield is over. We’ve got no idea why they think that. It can only be because they think interest rates are going up.
That’s not going to happen. The dividend and ‘Turbo Cap’ play is still active, and if investors gain more confidence about the global economy then even regular growth stocks look set to clock up more gains – on top of those achieved last year.
The financial world may still have a lot of problems to face and solve, but don’t for a moment think it will be a handbrake on stock prices.
According to Chant West, 2013 was the best year for retirement savers in 20 years. The way things are going, 2014 has a real chance of trumping that result.
Cheers,
Kris
Special Report: Five Fatal Stocks
