Theme for cobbling together a worthy retirement package

Over recent weeks we have been picking sharemarket themes. So far we have come up with the superannuation sector theme, an industry that has legislated growth; any business that services the sector and especially the self-managed super fund industry that is growing even faster than the industry as a whole.

Over recent weeks we have been picking sharemarket themes. So far we have come up with the superannuation sector theme, an industry that has legislated growth; any business that services the sector and especially the self-managed super fund industry that is growing even faster than the industry as a whole.

Twenty-five per cent of the population are baby boomers and they have only just started retiring. Superannuation will outdo everyone's expectations for longer than expected. We also mentioned the development of data centres because everything's going to the Cloud one day. What else?

Another theme you can explore, this time from the comfort of your armchair, is advertising spend, one activity well worth noticing. Advertising spend provides a huge clue when it comes to picking out potential investments. It doesn't always work, because some companies can market themselves into oblivion (OneTel) and some companies have an advertising agenda that is unrelated to success.

You can also ignore companies that are coming up to an IPO, for instance. It's all part of the IPO process, as anyone who invested in Myer and iSelect can tell you. On top of that some businesses have to advertise. Comparative product sites such as iSelect and Aussie Home Loans have to drive customers to their sites because they are taking a clip and not actually producing a product.

So advertising is not necessarily a sign of success, but it is certainly a good lead indicator of success because, agenda aside, generally speaking companies don't have the budget unless they are doing well. So keep an eye out for who's spending money and use that as a trigger to go and have a look at the company or the industry. More often than not they are succeeding.

Of most interest, I find, are the companies that "pop up". I found Webjet and iiNet that way. I notice Tassal's is now advertising and the share price has tripled in a year. What's going on there?

So make yourself a large drink, ping that microwave meal, grab the TV remote and go make yourself some money. And while you relish those ad breaks delight in the knowledge that you are one step ahead of all those SMSF investors who are watching me on the ABC.

Another easy theme to invest in is "current trends". Spotting current trends that have the ability to last for years is low hanging fruit. It works because no one ever prices in everything at once and if a theme is going to last you can still jump on late in the game and make significant gains. It's a lot easier in hindsight, of course, but the resources boom, for instance, only really started to grip the resources sector in 2003. At the time BHP was under $10; it went to $50. Fortescue was 25ยข; it went to $13. But did anyone say back in 2003, 2004 or 2005 that "there's a resources boom, BHP will be worth $50" or "Fortescue will be worth $13" and price them there instantly? No, it took five years to get there because no one ever prices more than a year or two's growth into a share price.

It's probably because the standard stockbroker's research only ever carries two years' worth of forecasts. If they carried and published five years' worth of forecasts as a standard then the truly amazing growth potential of some stocks would become apparent a lot earlier. But they don't, and luckily for you they don't because you can exploit that.

The first step is to identify the existing themes and then to ask, "Will they last?" The best performing sharemarket sectors in the year to June 2012, for instance - yes, June 2011 to June 2012 - were telecoms, telecom services, income stocks, defensive stocks, utilities, healthcare, infrastructure and REITs. The worst were resources, retailers and media.

If you had simply invested in the continuation of those themes (bar REITs) for the next year you would have made a fortune. Safe income in particular looks like a theme that's here to stay while rates stay down and everyone continues to sift through the equity market looking for quasi term deposits.

The bottom line is that you're looking for current themes and asking yourself, "Will they persist?" If they will you can still get stuck in. More clues on how to identify themes next week.

Marcus Padley is a stockbroker and the author of sharemarket newsletter Marcus Today.

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