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Here are the 10 long-term trends that I think will drive the global economy -- and the profits in your portfolio -- over the next decade and more. In my book, you'll find a chapter devoted to each:
- Go where the growth is, and that means putting some money into the developing economies of China, India and Brazil.
- The rise of the global blue chips. These companies are emerging from the world's developing economies to challenge Coca-Cola (KO, news, msgs), IBM (IBM, news, msgs) and Wal-Mart (WMT, news, msgs) on the global stage.
- The world is getting wealthier and older at the same time. So who's going to manage all that retirement money?
- Inflation is beginning a new era. After 20 years of low inflation, the world is headed for a decade of constantly rising prices.
- The world may not be running out of oil -- then again, it might be -- but it sure has run out of cheap oil. How to make back in the stock market what you pay at the pump and more.
- The commodity crunch. Developing economies are demanding more iron, more copper, more nickel, more coal -- and that has set off a boom for mining companies and the companies that equip them.
- Food is the new oil. It's turning out to be as hard to increase food supplies as it is to find new oil. We're looking at a decade of higher food prices driven by competition with biofuels and the fact that people in the developing world will eat more pigs, chickens and other sources of protein as their incomes rise.
- We've delayed and dragged our feet, but environmental problems have become so pressing that it's time to save the world and make a buck.
- The technology sector doesn't look anything like it used to, but fortunately the same rules still apply to what I call "hidden tech" stocks.
- It used to be that stocks and bonds from the United States got a premium in the financial markets just for showing up. Investors were willing to pay more because the U.S. markets were so stable. They're still among the world's best in that category, but now they've got company from Canada, Australia and, of all places, Brazil.
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You'll find stocks that let you invest in all of these long-term trends in the existing 50 Best Stocks in the World portfolio. After all, I have been thinking and writing about these long-term-investing themes for as long as I've been writing Jubak's Journal.
Tweaking the 50 best
For those of you who have come in late, I started my 50 Best Stocks portfolio in September 1998. I revise the portfolio once a year -- on or near the Sept. 20 anniversary date -- and even then I limit changes to a turnover of just 10%. No more than five stocks can drop off the list, to be replaced by other stocks, in any one year.When I pick the best stocks each year and decide which stocks to drop, I'm not looking at sector momentum or trying to guess the direction of economic trends over the next year or five years.
Pre-order Jubak's new book
Hitting stores in December, 'The Jubak Picks' details 50 great stocks for the next decade.
- Truly outstanding opportunities for global growth -- the ability to tap into one of the long-term trends I listed above, for example, over the next five or 10 years.
- A competitive edge that will allow the company to seize the lion's share of that global opportunity.
This year's five drops consist of two financials, one industrial stock, one technology stock and one energy stock:
- For Citigroup (C, news, msgs) and American International Group (AIG, news, msgs), reckless management has radically diminished two of the great financial franchises in the world. These companies -- in AIG's case, if it survives at all -- will spend years repairing the damage while competitors pass them by.
- In Boeing (BA, news, msgs), I see a company that is losing its competitive advantage in an increasingly competitive aircraft market. Within the next five years, Boeing and Airbus will have at least four new competitors.
- Nvidia (NVDA, news, msgs) faces increasing competition from Advanced Micro Devices (AMD, news, msgs) and Intel (INTC, news, msgs). It's Intel that worries me most, because the company is pushing down the price on increasingly powerful graphics processors. It's never good to be in a market in which a competitor with lower costs is eating away at your market share from the bottom.
- My last drop, Valero Energy (VLO, news, msgs), is a victim of a move by oil producers to add refining to their portfolio. When the Saudis build a refinery next door to a guaranteed supply of oil, that's got to hurt margins for a refiner like Valero.
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Keys to the economic turnaroundWant to know where the global economy and stock markets are headed? Watch China's GPD growth and OPEC's decision on how much less oil to pump, MSN Money's Jim Jubak says.
My adds for this year are railroad BNSF Railway (BNI, news, msgs), farm equipment maker Deere (DE, news, msgs), seed and agricultural chemical producer Monsanto (MON, news, msgs), Potash of Sasketchewan (POT, news, msgs) and water pump, valve and seals maker Flowserve (FLS, news, msgs).
Would I buy any of these five stocks or any of the other 45 on the list right now? Good question. And in my next column I'll try to answer it for this list and for growth stocks in general.
In a bear market and going into a recession, are any growth stocks cheap enough to buy?
Continued: Developments on previous columns
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