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David Kempton: my share tips for 2012
There are plenty of quality stocks out there – you just have to know where to look, says David Kempton.
As the eurozone sovereign debt crisis rumbles on with no resolution in sight, David Kempton shares his essential share picks for 2012.
The backdrop: Europe in crisis
As I write this the UK press seems more concerned with Sarkozy’s rebuff of the proffered Cameron handshake than the European crisis that still looms. A bad mistake by the French premier, who seemingly forgot that France exports more to us than we export to them: they need us more than we need them.
The British parliament is able to make and implement tough decisions faster than any other in Europe, our bank is still able to buy cheap debt, and our exchange rate can be adjusted to suit our own circumstances.
I have strong views on European economics, but I shall leave that to others and focus on where to invest in 2012.
Where to invest
We must remember that Europe’s population is only 730 million, while the rest of the world is 7 billion. Those 7 billion are mostly younger too, since our demographics are unhelpful, so our young workers are burdened with supporting more aging people.
The UK's outlook for 2012 looks dreadful, with unemployment rising, government tax take declining, reduced consumer spending, and houses simply unsellable in many provincial regions. I expect riots in the streets of some industrial cities this winter.
So, where to invest? The US has better demographics and a young, entrepreneurial population working in a more favourable financial climate that positively encourages risk and achievement. Couple that with recent better statistics and the US looks the best of the developed world.
The developing world has obviously slowed as a result of European issues, but it'll recover quickly and increasingly trade internally as countries become wealthier. So buy international quality stocks, preferably with some yield, and hold your nerve through the bumpy times ahead.
International big hitters
I have written on international big hitters before, but would draw your attention again to Fenner (FENR.L). I retain mine since it remains in a growth phase and could be bought at any time, as could GKN (GKN.L) and Rolls Royce (RR.L).
I remain convinced that we will see the same happen in our engineers and aero industries as we have seen in our (booming) motor industry, which is now almost entirely Japanese, Indian, Arab, Malaysian and Chinese. Then there is Germany with our Bentley and Rolls Royce brands.
If you cannot stomach the wild volatility that will surely ensue in that sector, buy a good, cautiously managed fund. There will be so many events violently affecting markets next year that it will be impossible to run your own cautious money. You will need to watch a screen 24/7, so leave that to a skilled professional.
Gilts will crash
The star of 2011 has been gilts, which appreciated 20%. They will surely be the dog of 2012, and any threatened increase in interest rates would see values plummet from here. Be afraid, and leave a pro to watch that move for you since it will happen very fast.
News sponsored by:
Making the most out of Europe's potential means seeing things differently. Learn more about how BlackRock's focused approach to investing in Europe helps investors unlock the continent's vast potential.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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Look up the shares
- Fenner PLC (FENR.L)
- GKN PLC (GKN.L)
- Rolls-Royce Holding PLC (RR.L)
- Royal Dutch Shell Plc (RDSa.L)
- BP PLC (BP.L)
- Premier Oil PLC (PMO.L)
- BG Group PLC (BG.L)
- Tullow Oil PLC (TLW.L)
- Hunting PLC (HTG.L)
- Kentz Corp Ltd (KENZ.L)
- Petrofac Ltd (PFC.L)
- Amerisur Resources PLC (AMER.L)
- Wildhorse Energy Ltd (WHE.L)
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