Could this be our last chance to buy before the FTSE 100 finally breaches the 7,000 level?
I’m hoping I’m not tempting fate again here…
…but the blue-chip index has been flirting with 6,800 of late and has set one of its highest closing levels EVER this week.
Of course, I have said before that nothing is more certain than…
- the FTSE crossing 7,000… just as it crossed 6,000, 5,000 and 4,000 before that;
- the mainstream media wildly celebrating FTSE 7,000 and proclaiming the landmark event as a sign the current bull run has much further to go, and;
- even more ordinary people saying no to 0.5% base rates and p***-poor savings accounts, and instead climbing aboard this rising market.
All that can only be good news for smart Fools like me and you who are already heavily invested…
…and who can sit back and relax as they watch Johnny Latecomer and Tailend Charlie arrive at the party and chase prices higher when the index approaches 8,000, 9,000 or even 10,000 in the years to come.
He may have enjoyed a few too many sherries at his firm’s Christmas party
You know you’re in a bull run when the optimists start making grandiose claims.
Take Nick Train.
You may remember I mentioned him few months ago. He’s the guy that runs the Finsbury Growth and Income investment trust and claimed Unilever “could double and double again” in the next twenty years!
Anyway, Mr Train may have enjoyed a few too many sherries at his firm’s Christmas party when he wrote his latest annual report in December.
“It seems to us that the background conditions are as encouraging for equity investing as at any time since, say, 1801, when the London Stock Exchange was founded.”
Hold on – at any time since, say, 1801?!
Okay, so forget 2009, 1982, 1975, 1954, 1940…
…apparently the best opportunity to buy shares during the last 213 YEARS is actually RIGHT NOW!
Well, at least according to Mr Train that is, who cites new technology, developing emerging markets and poor returns on cash as the “compelling case” to commit to long-term stocks.
These are the shares that will lead this market higher
Just so you know, Mr Train’s largest holdings are currently Diageo, Unilever, Pearson, Heineken and Daily Mail & General Trust.
Sure, I recognise Diageo, Unilever and so on are top-notch blue chips.
And true, they may all “double and double again” during the next 20 years.
However, such enormous, established enterprises are unlikely to lead the market higher in a full-on, no-holds-barred bull charge.
Instead, the front-running will be done by companies with much more dynamic, racier prospects…
…that allow investors to extrapolate sexy growth rates well into the future.
It has a market cap of £3.4 billion but estimated profits of less than £4 million
Connecting this trio are:
- they’re all online-based operations (Ocado delivers shopping, Asos sells clothes and Blur is some sort of work exchange)
- they’ve all registered bumper growth of late (Ocado’s sales are up 21%, Asos’ sales are up 37%, Blur’s total ‘project value’ is up 1,509%)
- their shares have all “doubled and doubled again” within the last TWO years.
To put it mildly, this trio has knocked the performance of Mr Train’s Diageo, Unilever and so on into a cocked hat.
And there’s one more connection among that trio…
- they’re all valued extremely highly by very excited investors
Ocado for instance has a £3.4bn market cap and yet City brokers reckon profits could be less than £4m this year.
Meanwhile, Asos has a £5.6bn market cap and trades on a 2014 P/E of about 100.
And Blur has a market cap of £200m-plus but last reported losses and annualised sales running at less than £5m.
But if right now really is the very best buying opportunity since 1801, and we really are headed for a full-on, no-holds-barred bull charge…
…then I wouldn’t rule out Ocado, Asos and Blur “doubling and doubling again” in the NEXT two years!
I mean, countless tech shares surged to completely ridiculous levels during the (original) dotcom boom of the late 90s – only then to surge even further!
My money could have doubled and doubled again
Still, you don’t always need to gamble on super-sexy growth stocks or hold a blue-chip fave such as Unilever for 20 years to enjoy a share “doubling and doubling again”…
Take Telecom Plus for example.
I first came across this mid-cap four years ago when I read the Fool’s SHARES 2010 annual share-tip report.
The company is hardly the most glamorous in the market – it resells gas and electricity via an army of self-employed salespeople.
But the share did offer decent financials, reasonable prospects and veteran management – all positives for sensible, long-term investors.
Unfortunately, I dilly-dallied about Telecom’s ‘fair’ valuation. It didn’t seem a bargain to me, so I never bought.
And of course the share price has never looked back…
…and has “doubled and doubled again” to quadruple investors’ money.
Even the most unlikely of companies can become mega winners
Of course, not every share mentioned in SHARES 2010 – or indeed, in the subsequent SHARES 2011, 2012 and 2013 annual share-tip reports – has gone on to deliver such mega returns. Some actually fell in value and one sadly went bust.
But I’ve learned my lesson that even the most unlikely of companies can become mega winners.
So I’m currently reading the SHARES 2014 share-tip report very closely – trying to work out which selections have the very best chance of “doubling and doubling again” in the years to come…
…just in case Mr Train is right and the current approach to FTSE 7,000 really is the best buying opportunity for 213 years!
> Maynard does not own any share mentioned in this e-mail. The Motley Fool owns shares in Unilever.