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Stock market & investment trends for 2012 and beyond.

January 16th, 2012 · Greg Atkinson · 7 Comments

At the start of last year I did not update my Australian stock market trends simply because I thought the market was basically going nowhere. This year however I feel it is worth looking at some interesting sectors again in an attempt to pick out some areas where investors might be able to find bargains and position themselves for the next bull market.

This is just a very broad look at the market and not a detailed analysis of each sector. As the year progresses I will look at some stocks in these sectors in more detail.

Australian stocks and stock market sectors to watch in 2012

Renewable or Green Energy

It does not matter if you believe the world is getting warmer or not, the fact is that 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. Be aware that some stocks have already rallied on the “green” theme so you need to look for value.

Some examples of ASX listed stocks in this area are:

Geodynamics Limited (GDY)
Infigen Energy (IFN)
Energy Developments (ENE)

Geodynamics 5 year stock price chart

geodynamics_5_year_chart_jan_12

From my own personal experience I rate stocks in this sector as high risk as many renewable & green technology companies appear to over- commit but under-deliver. The fate of Viridis Clean Energy (now de-listed) is a good example of the perils of investing in this area.

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:

Ramsay Health Care (RHC)
Sonic Healthcare Limited (SHL)

Sonic Healthcare 5 year stock price chart

sonic_healthcare_5_year_chart_jan_12

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. (especially if their share prices fall further on the back of a slowdown in China during 2012)

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.

But this is a risky sector at the moment in my view and I have had my fingers burnt already by trying to pick undervalued stocks in this area so please tread very carefully!

Some stocks to watch include:

Australand Property Group (ALZ)
Westfield (WDC)
Sunland Group (SDG)

Disclaimer

As always, I urge readers to do their own research and if needed seek good professional advice before making any investment decisions. Also please note that none of the above information is intended to act as any form of financial advice or suggestion to buy, sell or hold any stock or investment. The stocks mentioned above are simply examples of stocks in each area/sector and are not endorsed in any way by this site of the author of this article.

This post is an update of an article regarding stock market investment themes and trends that I first wrote back in 2008. For those interested the changes I have made over the years are recorded here in: Investment These and Trends

Greg Atkinson is the editor of Shareswatch Australia and the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp


7 responses so far ↓

  • 1 Lachlan // Jan 20, 2012 at 4:51 am

    I like AWE price action for a sharp reversal and rally to approx $3.00 and you could have secured a 5% divi on a 90 something cent share recently.

  • 2 Lachlan // Jan 20, 2012 at 5:58 am

    I put a bid below market today and will see tonight if I got it.

  • 3 Greg Atkinson // Jan 20, 2012 at 7:55 am

    I have been a long term holder of AWE; it is my junior oil & gas exploration play.

    I should also mention that I have had nothing but pain from investing in green/renewable energy stocks. I was for example (don’t laugh) an investor in Babcock & Brown Wind Partners (now Infigen) and worse still Viridis Clean Energy Group.

    Maybe that says something about the economic viability of wind power?

  • 4 Lachlan // Jan 22, 2012 at 6:27 pm

    missed em Greg 🙁

  • 5 Lachlan // Jan 23, 2012 at 10:21 am

    Got my AWE today at 1.38. Closest targets around 1.75 and 3.00 approximates.

  • 6 Plornt // Feb 25, 2012 at 9:46 am

    Thanks for some of the stock selection Greg. I liked your AWE pick, but unfortunately I hesitated to buy it, and missed a ~35% gain (and likely more to follow).

    This drivel should not be taken as financial advice. Seek to obtain professional
    advice before proceeding with any financial decision.

  • 7 ffder // Apr 6, 2012 at 2:56 pm

    the easiest way to take advantage and capitalise on short term volatility is GUNNS (GNS) AS
    – high volumes of trade
    -volatile
    -undervalued
    -easiest to make a quick return if u know the market and share prices

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