Investing in innovation

Kiplinger had an article that nicely corresponds with the Economist's article about technology replacing people as time progresses.

It said that one of the best things investors can do is look at which companies are the most likely to innovate and design something that will be the next big thing.

Some of the companies that they see doing this and recommend are Apple, Google, General Electric, Amazon, and Illumina.

But since individual stocks are riskier, my biggest take away from this article was their recommendation of Fidelity New Millennium. It is a mix of sometimes volatile, high growth companies balanced with steadier, bargain priced fair. It includes a couple of the big stocks from the article- Google and illumima. The manager has a good track record too- from July 2006 to the end of 2013 it has returned 9.6% annualized, beating the S and P by more than 2%.

For what it's worth, I think this fund would be a good investment. Common sense says that technology and innovation are the future, The Economist and Kiplinger agree on that point, and the fund cuts the risk of the individual stocks while betting on their success. Plus the fund follows the rule of a manager with at least a solid 5 year track record. At the very least, it appears to be a fund to look at more closely.

China Shoppers

According to the latest Economist issue, China is a country to watch. Apparently, there are many Chinese with cash to burn, and from 2011 to 2013 China contributed more than any other country to the growth in global consumption.

International companies have noticed, and are working hard to benefit from all of this spending. It used to be that western brands would sell better just because it was a western brand, but now the Chinese consumers are more discerning.

Just like producers make sure to keep China in mind as they make their films, other companies are planning advertising and products to cater to this population. The article predicts that future consumer markets everywhere are going to look more Chinese and be cosmopolitan, luxury minded and online.

February Kiplinger items of interest

There was an article on hedge funds, which suggested to keep five to ten percent of your portfolio in investments that don't move with the market. Pakistan is one of their recommendations for bonds as their bonds that mature in five years are yielding 12.3%, 11 percentage points more than the US. The same article sited the best no load mutual fund as PREMX with its portfolio including Ukraine, Venezuela and the Philippines. It yields 5.5%.

Another hedge fund suggested is UGA, which is gasoline futures, stating that as the price goes up at the pump, you can at least know your investments are happy. However, another article I read today online said that people are driving cars less in the US these days, and consistently have been undershooting government predictions. The driving decrease is partly from our aging population, the unemployment, and the younger generation either being green (biking or public transportation) or living somewhere that they don't need to drive often.

Another article was on eight low price, highly speculative, but promising stocks. The two that sounded the most interesting to me were CERS, which cleans platelets and plasma and later blood cells and CRY, which has a bioglue and a product to control bleeding during surgery.

I liked the sound of the Eventide Gilead fund, as it chooses companies that align with Christian principles, and has earned 17.5% annualized, and beating the average midsize fund by 8 percentage points a year.

Recommendation for how to spot an upcoming superfund- promising manager with five years of solid track record, a sound strategy and a willingness to close the fund if assets get too big.

Those were the things that stuck out to me in the magazine for the month.

Balance

A big key concept I have gotten from multiple sources is the big need for balance when it comes to the field of economics.

For example, the housing market. Some sources are positive about the rising house prices due to the low supply. Some are pessimistic that as the prices raise, it will reach a point that it effects people's willingness to buy a house and the market will be hurt again.

Optimal for growth is a balance, where the house sellers are benefitting from the sale, and house buyers are still willing to buy.

The movie market also needs to find a balance, which is apparently tough to do. Big budget pieces usually do well, and low budget ones don't need to make a ton, so they do okay, but a medium budget movie doesn't usually do well. Plus, they need to do certain things to appeal to the Chinese market, but too many concessions that way can hurt them with American viewers. Even the plot walks a fine line. An original idea, if good, can do better than a remake. But the remakes or based off book movies usually come with a sizable group of people who want to see the movie, and so feel more secure to the movie producers.

The government has to find a balance between the diametrically opposed Republicans and Democrats to accomplish anything. Their inability to do that at times is why we had the government shut down, and apparently also had huge cuts from budgets on both sides because they couldn't agree. This, to me, is ridiculous. Grown men should be able to find compromises without having to shut down the government first.

I know none of this really relates to investing, but more a sign of my increasing understanding of the world that the market operates in.

Highlights of the day from the blogosphere

A few blogs talked about how other countries are doing. No positive reports, all negative.

China is apparently not doing as well as it should be. Brazil is only barely exporting more than it is importing, and India is fighting off a big deficit. This is all from memory, I still need to work on a better way to keep track of key points as I read blogs, which are not as easy to look back on.

In the US construction is doing very well, better than it has in a long time.

In non-investing news:
I was disappointed to hear that the US dropped many tax credits that were green initiatives- like supporting train commuting, wind power, and energy efficient buildings. Also, even though I am currently not a teacher, it was sad to see the teacher supply credit end.

It was interesting to read about the possibility of geoengineering to counteract the green house effect, but if we start it, as a world, we can't stop it again without causing worse problems.

Watch the Watch

Ezra Klein recently ran a post about a Swiss watch factory fire. I found it interesting that watch sales, particularly of mechanical, Swiss watches are doing exceptionally well lately.

Personally, I haven't worn a watch in forever, as my phone performs that function for me. Yet, according to this article, a nice Swiss watch is on the rise both as a fashion accessory, and as the gift of choice in business and government.

Swiss watches corner the market on mechanical watches, with Swatch being the main company making the components. Also, Swatch is increasingly protective about even selling their components to other companies, so they are poised to continue to profit from the increasing demand for a nice Swiss watch.

December Money Magazine

Though there were many interesting articles in this issue, many of them do not help my key focus, which is looking at where money should be invested, and information that could provide insight on that front.

One of the main investing articles talked about how in spite of the recession, the vice stocks, the ones for gambling, smoking and alcohol continued to do well. On this point in particular, I found it interesting that many of the alcohol sales are not from the cheap brands, but instead from the more expensive, quality brands. This actually coincides with what I have observed from my husband's family, where they would all prefer to spend more for a better alcohol than waste their money and calories on a cheap drink.

The article stated that Diageo, which produces Johnnie Walker, Guiness and Ketel One is trading at 18 times 2013 earnings. The competitors are actually slightly higher, but this particular company has more room to grow because it sells more overseas than its competitors.

Later in the article, it stated that if you don't want to invest in these areas based on principle, you have more of a challenge, but organic food makers might be a good area to look at. The two they named are Hain Celestial and Whole Foods. The article states that both of these companies have good return on capital, healthy recurring revenue and great projected growth rates.

I know that my family does prefer to shop organic, and I know many of my friends do as well. Based on nothing but my opinion, I think that as more people learn about what chemicals are in their products, and possibly more studies showing the effects of these chemicals on our bodies, more people will try to switch to organic products if they can afford to do so.

 There was a different article that truthfully confused me quite a bit, but I'm sure I will learn more as I go. This article was discussing the difference between a traditional index and a fundamental index. From what I understand, the key difference is the factors on which the stocks are chosen. It stated that there was an extra return for value stocks, and fundamental indexes tend to have more of those. Also, smaller stocks apparently outperform over long periods.

As I understand it, the main value of an index is that it allows you to diversify without active management, which is choosing all your own stocks and following them individually. It sounds like the fundamental index is somewhat of a hybrid, with some of the benefits of active management, while retaining the safety of an index.

The magazine recommended Europe, as their economy is expected to expand 1% in 2014. It also recommended investing in technology, as business spending is supposed to pick up.