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Stock market & investment trends for 2010 and beyond.

January 3rd, 2010 · Greg Atkinson · 2 Comments

Another year, another decade and time once again to look at our shares portfolio and perhaps review our positions. Although the global financial crisis has been tough for investors the fact is that the Australian stock market did bounce back in 2009 and if history is any guide then we are likely to see it finish higher in 2010.

So for long term investors now might be a good time to move into some stocks that are still well below their 2007 highs if you believe (as I do) that eventually we will see the ASX All Ords & S&P/ASX 200 both pass 6500 again in the years ahead.

Please remember when reading this post that I am writing from the viewpoint of a “long term” stock market investor and not a day or technical trader.

Australian stocks and stock market sectors to watch in 2010

Renewable or Green Energy

It doesn’t matter if you believe the world is getting warmer or not, the fact is governments around the world are going “green” and there is a push to source more of our energy needs from renewable sources. Companies that own wind farms, solar farms etc. or develop technology related to renewable energy are in an expanding market.

This does not mean every company in this area will do well, but I would suggest it is worth doing some research into this area.

Some examples of ASX listed stocks in this area are:

Viridis Clean Energy Group (VIR)
Geodynamics Limited (GDY)
Infigen Energy (IFN)

Agriculture

If you believe that the mining boom will continue, then you might as well jump on the soft commodities bandwagon as well since the people that will live in expanding cities will want to eat, and as they get more wealthy they will want to eat better.

In addition due to the spread of cities and urbanization much of the existing farmland in the world has been lost so this means that good quality farmland should become more valuable. You can invest in this sector by getting into a soft commodities fund or via companies with direct exposure to this sector.

Some examples of ASX listed stocks in this area are:

Primeag Australian Limited (PAG)
Australian Agricultural Company (AAC)
Graincorp (GNC)

Healthcare/Aged care

I think we have only seen the tip of the iceberg as far as growth in the health care sector goes in Australia and probably in many other developed nations as well. Eventually people will start to realise that having private health insurance is going to be better for them than a flatscreen TV, especially as they get older.

It always puzzles me how people will spend money quite willingly on an overseas holiday but think twice about having adequate health cover. Of course you can sit back and rely on the public health system but when you find yourself in some over crowded public hospital ward waiting for your medication for a few hours then that holiday in Bali will look like a pretty bad investment.

The aged care sector is also a growth area in Australia and many other developed nations thanks to the fact we are living longer. In this area we have everything from gated estates aimed at the over 55 year olds to assisted living apartments etc. There is no doubt that there is a growing market for aged care services and so companies which can successfully tap into this area will do well in the years ahead. Some listed companies in this sector include:

Healthscope Limited (HSP)
Aevum Limited (AVE)
Ramsay Health Care (RHC)

Although I am a fan of the healthcare sector over the long term I am a bit cautious about what impact any government policy changes may have on private hospitals and clinics. Therefore I am not quite as bullish about this sector over the short-medium term.>

In addition to the investment themes above I will be watching closely the follow sectors in 2010.

Mining, Oil & Energy

What a ride it was in 2008 for owners of mining stocks. Earlier in the year it seemed BHP Billiton would smash through the $50 mark and RIO Tinto would be trading above $150. We were after all, in the middle of a commodities super-cycle and Australia was going to ride the China boom for many years to come.

Of course all good things come to an end and during the global financial crisis mining stocks were not spared from the rout seen on the Australian stock market. During the crisis I suggested that mining stocks were worth having a look and indeed investors could have made some tidy profits by moving into this sector during the dark days of 2008/2009.

Now bargains are a little harder to find and I actually prefer oil & gas stocks at this stage, although mining related stocks may still offer long term investors good returns over the years ahead.

Some stocks to watch include:

BHP Billiton (BHP)
Global Mining Investments (GMI)
Rio Tinto (RIO)
Australian Worldwide Exploration (AWE)
ROC Oil (ROC)

Listed Property Trusts/Real Estate Investment Trusts

This sector has seen stock prices basically collapse in 2008/2009 as a result of the global financial crisis and will be under pressure in 2010 as well. However this is one of those areas where you need to decide I guess if you are in the “world is about to end” camp, or the “world will return to normal” camp.

I believe the world will eventually sort out all this financial mess and that asset prices will start to rise again at some point. Therefore with many stocks in this sector currently trading well below book value there might be some bargains amongst the ASX listed property and real estate investment trusts.

But this is a risky sector and I have had my fingers burnt already by trying to pick undervalued stocks in this sector. So please tread very carefully!

Some stocks to watch include:

Australand Property Group (ALZ)
Multiplex Acumen Property Fund (MPF)
Westfield (WDC)
Sunland Group (SDG)

Finall as always….

Please be sure you to do your research and if needed seek good professional advice before making any investment decisions. Also note that the article above  is not intended to act as any form of financial advice or suggestion to buy, sell or hold any stock or investment.

The author of this article has a direct or indirect interest in VIR, IFN, PAG, BHP, GMI, AWE, WDC and MPF.


2 responses so far ↓

  • 1 pay tv // Jan 18, 2010 at 7:36 pm

    I think credit loosens because it really has to, but I’m not sure the 20%+ rates consumers paid will be so easily forgotten everyday consumer. But if you recall, I stressed this was a temporary glitch in the consumption machine and I fully believe our short memories and flippant mentality towards debt will kick in later in the year.

  • 2 Greg Atkinson // Jan 19, 2010 at 12:49 pm

    It is curious that Australian’s seem to be racking up more household debt despite the fact we are trying to recover from a global financial crisis where high levels of debt caused many of the problems in the first place.

    Is the Australian economy heading for a big fall someday? I wonder how consumer spending would react to a few years of declining house prices?

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