Blogs & Comment

Book on six investing trends: a review

A new book, Buying at the Point of Maximum Pessimism: Six Value Investing Trends from China to Oil to Agriculture(2010), examines six socio-economic trends and recommends buying into them whenever moments of maximum pessimism arise. The author is Scott Phillips,principal and portfolio manager at Lauren Templeton Capital Management LLC.
The book gets off to a good start with a foreword about preparing for market downturns, written by Lauren Templeton, founder of the aforementioned investment firm, niece to Sir John Templeton and spouse to Phillips.
Following the foreword, Phillips discusses — with an ample sprinkling of charts and data tables — the financial turmoil of the past three years and six big-picture themes that should be on value investors watch lists. Three of the themes may be familiar to most investors:
growth potential of companies participating in the rise of consumerism within China and other emerging countries.
favourable positioning of fertilizer, farm-equipment and Brazilian agribusiness companies catering to the demand for higher protein diets made possible by rising income in developing countries
secular rise in demand for crude oil against a back-drop of costlier supply, and consequent spillover into alternative sources of energy such as the oil sands.
Perhaps the more interesting part is the three less well-known themes. It may also be the more useful part: the themes dont seem to be crowded trades to the same extent as the three above and may thus be closer to being prospecting grounds for value investors.
the bright future for aquaculture (fish farming) arising from the tragedy of the commons playing out in the overexploitation of ocean fish stocks along with rising demand for fish protein from emerging nations
growth prospects for educational firms providing online/computer-based training, prep courses, tutoring books, etc. to students in China and other emerging countries, where the value of education is deeply embedded in the culture
rising demand for rare-earth elements, driven by growth in high-end consumer and green technologies and supplied mostly by China.
Phillips doesnt mention too many companies to invest in. An exception relates to the theme of educational firms meeting needs in emerging countries. His list includes ATA Inc., China Distance Education Holdings Ltd., Aptech Ltd. and MegaStudy Co. Ltd.
I personally found the foreword and the less-known trends the more rewarding parts of the book. They offered fresh perspectives and new material for me. The rest of the book was not as rewarding because it was mostly material I had encountered in publications elsewhere.