My belief is that in order to be successful you need to listen to and observe the market's behavior rather than predicting long-term cycles. By using a methodology, I simply try to identify a certain breed of company, quantitatively isolating those companies with the highest revenue growth, combined with the highest accelerating profit margins.
Taking this universe of companies, we see which trade at a discount to their current valuation and which are under accumulation, highlighted by an improving relative price trend.
This methodology tends to identify clusters of companies within a given sector that are experiencing pricing power and are generating accelerated levels of cash flow. I call these companies "magnets," as other investors cannot help but to be attracted to them. We continue to see several groups and many stocks that meet our criteria. Therefore, I remain solidly but selectively bullish.
There are many who believe that the energy and basic materials sectors have come too far too fast, and currently contrarian investors are quick to dismiss these sectors. Almost two decades ago Sir John Templeton stated that the fall of the Berlin Wall was one of the single most important events in his lifetime.
Templeton accurately suggested that the spread of democracy would lead to an increased population experiencing and embracing capitalism and consumerism. Clearly the recent emergence of the BRICs (Brazil, Russia, India and China) is fueling a global expansion beyond what any of us would have thought possible just a decade ago.
This is not a simple or short-term case of sector rotation, but instead a long-term trend that is almost irreversible.
We will use this pullback in the group to identify our top five international stocks to magnify your portfolio.
Orckit Communications, together with its subsidiaries, engage in the design, development,
This Israeli technology company is showing one of the most dramatic accelerations in revenue, earnings, margins and profit. While network and telecom technology changes quickly, ORCT is clearly providing the optical industry what it is currently looking for. The stock has yet to be accumulated by mutual funds.
ICICI Bank provides banking products and financial services to corporate and retail customers primarily in India. It offers a range of products and services in the areas of commercial banking, investment banking and insurance. IBN is a private sector commercial bank with a network of 510 branches.
Currently a tremendous middle class is being created throughout India. This rapidly growing bank serves one of the fasted growing markets in the world. While the bank has been profitable for years, revenue and earnings are now accelerating.
Southern Copper operates as an integrated producer of copper, molybdenum, zinc and silver. Copper smelting plants are simply not producing enough to keep up with worldwide demand.
PCU is South America's largest and most profitable copper producer. The company's current quarterly dividend is $2.75 per share, which amounts to 14% on an annualized basis. The tremendous cash flow and return on equity for this company makes it stand out in our model.
Companhia Vale do Rio Doce engages primarily in mining and logistics businesses. It engages in iron ore mining, pellet production, manganese ore mining and ferroalloy production, as well as in the production of nonferrous minerals, such as kaolin, potash, copper and gold.
Profitable and based in Brazil, revenue, margins and earnings are accelerating while the company still somehow manages to fly below the radar of most American investors. With an excellent valuation and high dividend, RIO is in a sweet spot for the global economy.
Grupo TMM operates as a multimodal transportation and logistics company in Latin America. It primarily engages in various businesses, including trucking, third-party logistics, container and railcar maintenance and repair, offshore supply shipping, clean oil and petrochemical products shipping, warehouse management, shipping agency, inland and seaport terminal.
TMM has been showing solid top line revenue growth and generating significant cash flow, recently breaking out of a consolidation pattern to turn bullish.
Jordan Kimmel is editor of Magnet Investing.