I think overall the US equities market and international market will remain bullish. More growth will be found in other countries as they unlock value and begin to encourage innovation, good business principles, and competition to rival markets. The only way I see the environment changing for the US is if China and other countries begin to express interest in lessening their foreign currency holdings of American dollars. Obviously the US is floated on credit and anything that will impact its creditworthiness will be a big blow. The interest rate cycle is bullish again. Startups are getting money again and tech stocks are still churning forward.
Some interesting things I saw out of the end of year statistics from ‘The Economist’:
- Venezuela, Chile, Malaysia, the United States, and China were the worst performing stock markets of 2005. Venezuela is losing confidence internationally with Hugo Chavez’s rise to fame. China still has very restrictive controls on private investment and public stock investment. What is the common thread among all these countries? Growing political xenophobia and distrust and artificial controls on business conditions. Yes, I think the US is suffering as a result of its policies.
- China, Russia, and Saudi Arabia have staggeringly positive trade balances, $102.1bil, $119.6bil, and $84.6bil respectively, many many times the international average. They also have hot increases in GDP. India is suffering from inflation, 5.3% in consumer prices last year.
- Egypt’s stock market went up over 120%. Wow. Imagine this happening in the rest of the non-Gulf Middle East.
I’m looking to put my deployment money to good use by investing it in individual stocks. I’m specifically looking to invest in only two types of stocks: stocks with high dividend yields and high cash flow like Altria (MO) or small, underappreciated tech companies that are going to start making it big, hopefully yielding me multi-baggers.
I’ve only found two stock picks that have yet to spring off but will once they hit critical mass.
The first is Sirius (SIRI). Sirius offers a satellite radio product including hardware and content exclusivity rights to almost all the major sports leagues and Howard Stern, most notably. The net-savvy folks prefer Sirius even though XM Satellite has more subscribers and more channels, and less debt. XM seems to be a company that sold itself out in order to get put in as many systems as possible, while Sirius has decided to go after content. The smart money is on Sirius. As satellite radio becomes cheaper (the hardware is still mildly annoying to provide a car and home solution) and more available, it will become more popular. I’ve listened to satellite radio in a rental car and I loved the variety of music and lack of commercials. I actually enjoyed listening to the radio again. And trust me, the only times I have enjoyed listening to the radio were when Dallas used to have ZROQ, when I listened to Howard Stern in Dallas and Austin, and tuning into the Baghdad-broadcast military rock station after not hearing any new music for half a year.
SIRI is still in the $6-7 range and even though the company has a lot of debt, I think it will get taken up in the hype-train. Maybe it’ll take a couple more years but right now seems like a great entry.
My new favorite stock is Nintendo (NTDOY.PK). Nintendo’s getting the hype after being trashed for its GameCube sales for a couple years. But as nintendoinsider.com claims, Nintendo’s actually making more money off its gaming systems than is Microsoft or Sony. Nintendo is smaller and Nintendo is more committed towards quality content and innovative game-making. If you read the fiscal reports for Nintendo, they are trying to stress that they’re making gaming fun again for people of all ages. This is important to me because I have no interest in the latest sequels to games I was never interested in in the first place like Madden or Dead or Alive. Plus the costs for buying those games has become ridiculous. Contrast this with the highly successful and still-ramping-up DS, the handheld with games that are actually fun like Animal Crossing, Mario Kart, WarioWare (that game with all the mini-games), PhoenixWright (that game where you’re a lawyer working a case), Dr. Sudoku, and Trauma Center (that game where you operate on people). The DS’s games can be described by the unique aspects of them, which is always a good sign. There are also non-games such as Elektroplankton, which lets you create music, and Nintendogs. DS games are much cheaper than, say, the Sony PSP’s. Plus the hardware is half as expensive, $130 vs. $250.
The Revolution is supposed to have a new controller that looks like a remote and which can be used as such or turned sideways for a gamepad-like interface. It’s also rumored you can swing and move the controller around to interact with games. So much buzz about this new controller has already been produced.
Nintendo’s Revolution will be the key for the stock, which only trades as a pink sheet ADR for American investors. Its main selling point is the legacy support for all the past Nintendo games we’ve come to love. Based on the Xbox Live’s success with downloadable content, I think this selling point will be massive, particularly if combined with fresh content on an online Nintendo network. Nintendo’s turn-around on supporting wifi is also encouraging. Microsoft has not realized that people will pay money for the simplest of games, if they were only enjoyable and fun. Microsoft is more of a business approach: stuff the features in and throw it out at the masses. Sony has its head in the clouds, preferring to create more artsy games. Nintendo is about fun.
Out of the three companies, Nintendo’s site emphasizes community the most. It develops a brand identity and loyalty with showing gamers loving the experience. Nintendo’s site also makes it the easiest to view videos or screenshots of games, and reviews and feedback are fed from nintendopower.com, which began as an official gamer’s magazine for Nintendo. Everything has come together for this company finally.
And the media battering of Nintendo’s lackluster sales has kept the stock down. Things will change in 2006. I expect this to be another Apple, for Apple had all the style and nifty design and feel-good loyalty that Nintendo does. The DS will pick up steam and kick ass this year, right into the release of the Revolution which will become a must-have for hardcore gamers and for casual gamers alike.