Seven opportunities to consider

FROM stocks to property to gold, there are many prospects.

Although Brisbane’s price growth trails Sydney and Melbourne returns, property yields are

SOMETIMES it’s fun just to stand back and look across the markets to determine where the good investment opportunities are at any given time. In mid-2014 we’ve got some clear basics to work with: record low interest rates, a lively sharemarket and an improving property market. Obviously every idea here carries conventional warnings: shares can be volatile, property is prone to cycles and unlisted trusts are illiquid (not easy to buy and sell). Separately, some — but not all — of these ideas have been recent recommendations at Eureka Report. With these key factors in mind, we offer seven interesting investment ideas.

Unlisted property trusts: They have a mixed history and they lack the transparency of listed trusts but they have been making very good returns and there are specific tax advantages in this area. Big players in the space would be operators such as Charter Hall and Cromwell Group.

Some of the best financial advisers have been pointing investors towards unlisted trusts in recent times because open-ended continuous trusts have substantial non-taxable income due to significant depreciation deductions — income yields average about 8 per cent a year.

An ASX 200 Index fund: Here’s the thing: seven years ago the ASX 200 was at 6800 while today it is at 5480. We have a considerable way to go before we get back to where we were in 2007. Keep in mind that the US passed its 2007, pre-global financial crisis high many months ago. What’s more, the sharemarket — unlike the residential real estate market — is not expensive on a range of key measures. In the absence of inflation, worldwide equity markets have an ongoing catalyst from easy monetary policy.

There will be shocks along the way but the ASX has returned 12 per cent a year in total returns on average for a century and it’s a reasonable assumption that it will manage that number in future years. Index funds remove all thinking and worrying from the sharemarket process; you simply buy the index with all that’s good and all that’s bad and get an average return, which may suit many people these days.

Direct property: It must be Brisbane’s turn. The two larger cities of Sydney and Melbourne have been racing ahead for 18 months with returns in double figures.

Oddly, Brisbane, though it was hit hardest post GFC with the flooding of the Brisbane River, has failed to get back on track.

The city’s price growth trails the Sydney and Melbourne returns for no obvious reason other than a ‘‘time lag’’ — property yields across the city are as good and regularly better than the larger cities.

Virtually every property analyst says Brisbane is next in the national recovery. And with one in four new properties in Queensland being purchased by foreign buyers, according to RP Data, Brisbane is the standout residential opportunity this year.

A takeover target: With the blitz of activity around Treasury Wines, Goodman Fielder and David Jones, takeover fever is in the air. The nature of takeover activity is something akin to a domino effect — once the first moves are made, everyone must get into the game.

If you want evidence, recall how Saputo of Canada’s bid for Warrnambool Cheese and Butter last year triggered a doubling in the share price and the arrival of at least four international food companies to the bidding process.

There are dozens of targets to choose from in the current market: One lesser known candidate is the healthcare stock Azure, a ‘‘buy’’ recommendation at Eureka Report. The healthcare group recently rejected a takeover attempt from an unnamed suitor but the stock price remains firm, a sign surely that this company is capable of making it on its own. That said, sooner or later another predator could arrive on the scene.

BHP Billiton: In anyone’s eyes it’s a ‘‘value opportunity’’ though patience may be needed. It’s one of the world’s greatest mining companies, locally listed and planning a spin-off. Even with $100 a tonne iron ore prices, when you are producing at $40 a tonne you can only win when the smaller miners get crushed.

Moreover, BHP is being named as a buy across the world; stockbroker Cazenove of London and Barrons magazine of New York have recently added their weight to the recommendation.

For many Australian investors the issue is that they already have BHP in their portfolios and may have witnessed the stock soar and drop through different phases of the mining cycle.

For newbies, though, it looks awfully attractive on a price-earnings ratio of 11 times and a dividend yield of 3.47 per cent.

A gold exchange-traded fund: Every diversified portfolio should have gold — and, unlike a lot of rival asset classes, gold is now thought to be nearing the end of its downward price cycle as it hovers at $US1300 an ounce. It is the great bulwark against inflation, and inevitably — as we are endlessly told by the best minds in business — global money printing is going to unleash inflation.

For many years the only way to buy gold was in the form of gold bars. (Obviously gold stocks are another possibility, but here we are talking about gold the commodity.)

Traditionally, storage was the key problem: though gold bars look good they are actually awkward to keep and costly to secure. Now ETFs such as that offered by stock code GOLD or the Perth Mint’s at stock code PMGOLD can track the pure gold price, allowing retail investors a new way into the precious metal.

A hybrid hopeful: If you are looking for a speculative opportunity in the fixed income market rather than a conventional income return, then the Elders Hybird is a clearly very special security at a very special time. Basically this note (stock code ELDPA) and the company behind it have been doing it very tough for a very long time, but in recent months there is at last a sense of turnaround with new chief executive Mark Allison and a return to operational profitability. Just now there is the possibility this hybrid will improve strongly and it may soon start paying its ‘‘coupon’’ (or regular income) as well. It has been trading at under $30.

James Kirby is the managing editor of Eureka Report.

Trial Eureka Report FREE for 21 days. Register now at www.eurekareport.com.au