Accountancy and financial advice specialist Crowe Horwath has compiled a research paper into the 10 best investment ideas for 2014, helping investors and their advisers understand how macro trends will impact investment portfolios in the medium to long term.
Investors should be making more active investments for their portfolios, Crowe Horwath research head Jeremy McPhail said.
“We have seen companies like Nokia, a mobile phone giant, dwindle to only 3% of the global smartphone market by failing to renew their presence in an ever changing space. Companies which invest time and resources into reinventing themselves and their products or services are the foundation for any well performing portfolio.”
Companies investing in research, development and technology – like blood biotherapy company CSL – will be worthy of investors’ attention, Crowe Horwath said.
Other investments identified in this year’s paper include Australia’s travel industry which is likely to benefit from the changing demographic shift as baby boomers retire and look to travel. Also, as emerging nations such as China and India’s middle classes develop, the number of people travelling will increase and Australia is seen as a desirable destination.
“To take advantage of this, over the medium to long term, we are increasing clients’ exposure to major airport infrastructure assets such as Sydney Airport which is forecasting consistently increasing passenger numbers, providing good room for capital growth as well as steady and sustainable income streams,” McPhail said.
In a historically low interest rate environment, investors looking for sustainable income are being forced to move away from the safety of term deposits and cash into riskier investments. Quality property and infrastructure assets can provide a viable alternative for this in a portfolio.
“Tony Abbott has made much of the fact that he wishes to be known as the infrastructure Prime Minister, leaving behind a legacy of long life, productive assets that will continue to provide economic growth for Australia. While we expect an increase in development of new assets, we favour exposure to more mature and established infrastructure through companies like APA Group,” said McPhail.
Crowe Horwath’s top ten ideas for 2014:
1. Focus on your goals, not the Jones’s –
Consider your personal goals and needs when setting your investments
2. Change - The only real constant –
Baby boomers approaching retirement are changing where consumption is occurring
3. The innovators –
Innovation is not just good for consumers but it is producing businesses that are more efficient and producing tangible shareholder value
4. Servicing the demographics - Again! –
With a retiring population, aged care facilities demand will outstrip supply
5. The new political regime –
With businesses holding back spending due to the 2013 Federal Election, cashed up companies are likely to be looking at mergers and acquisitions in 2014
6. Urbanisation and the growth of the middle class -
Urban population is now greater than rural globally and will lead to different consumer spending patterns
7. Where to invest offshore? –
The outlook for global economies is mixed but will mainly be driven by the ongoing recovery in the US market
8. Yield does not equal income –
Don’t fall into the ‘yield trap’ but look for quality stocks with both rising dividends and share prices
9. Infrastructure and property - the new annuities –
Cash is returning less than inflation so look to mature property and infrastructure for income streams
10. What to do with the banks? –
If you own for income, they still provide and attractive yield but they appear fully priced for growth.