Sometimes taking a contrarian view of a market or investment, can pay off big time…
One of my all-time favourite investors, Benjamin Graham, proved this nearly 100 years - during the Great Depression.
When stocks crashed nearly 70%, Benjamin Graham didn't give up and avoid the stock market.
In fact, he saw this as a perfect opportunity to make money by pinpointing bargain stocks from the wreckage of the bear market.
And this contrarian move worked amazingly!
From 1936 until he retired in 1956, his Graham-Newman Corp. fund gained at least 14.7% a year, versus 12.2% for the stock market as a whole - one of the best long-term track records in Wall Street history.
Just like Benjamin Graham did back in 1930s, I've identified two contrarian investment ideas that could make you money in 2020…
Is this the secret to becoming a stock market millionaire?
You don’t get taught it at school.
And you’ll hear shockingly little about it in the press, or on the evening news.
But right now, a tried and tested wealth building secret is helping make investors a fortune.
Contrarian investment idea #1: China
And here’s something you might find interesting…
Despite trade wars, slowing growth and violent Hong Kong protests, China’s stock market is one of the best performing this year.
The Shanghai Composite Index has grown over 18% - more than DOUBLE the JSE All Share!
And China continues to be a very attractive investment in 2020 and beyond.
1) The continued inclusion of Chinese stocks by global index provider MSCI
Because of this, around $48 billion has flowed into China’s stock market in 2019. And, over the next 10 years, China’s stock market can expect a $2 trillion cash-injection.
2) A weaker dollar
When the US Federal Reserve started raising interest rates a few year ago, investors bought lots of dollars and piled tons of cash into the US bond market. Consequently, the dollar boomed and has been one of the strongest performing currencies.
However, in 2019 the Feds have turned a corner and are back to lowering interest rates to boost US growth. When interest rates fall, investments like US bonds tend to become less attractive as their yield falls.
This in turn drives investors away from the US markets (including selling their dollars) and into emerging markets currencies, bonds and stocks like China.
In fact, according to Bloomberg’s survey of 57 global investors, strategists and traders
Emerging markets will outperform developed markets in all assets.
And I’m backing China to be one of the best performing markets next year!
The very next SMS you receive could make you R1,914!
550 people ALREADY have my number in their address book - and since I started SMSing them, they've made thousands in profit in the last few weeks alone.
Now it's YOUR turn to see how much you could make!
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Contrarian investment idea #2: South African bonds
You probably will call me crazy for saying this…Well with a downgrade looming and all. But hear me out…
You see, essentially a downgrade will mean international investors will be forced to sell our bonds and this obviously means there could be big capital losses for bond investors.
However, South Africa’s has been teetering on the edge of junk status for a while now, and much of the pessimism has already been priced into our bonds.
So if we do get downgraded, yes our bond yields will fall as investors flee, but I don’t expect SA bonds yields to crash too much – between 1.5% and 2%.
This will put the 10 year SA bond at a yield of around 10.5%-11%. This will be considered a very attractive investment for local and international investors, as global yields offer basically nothing right now.
Just remember, if you do invest in SA bonds, rather wait for the rating agencies decision in the first quarter of 2020. This way If our bond yields do fall, you can pick them up at a great price and lock in an attractive yield!
See you next week.
Managing Editor, The South African Investor