Thursday, August 25, 2016

Americans are flocking to Cuba

Cigar Aficionado:

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From 2014 to 2015, American visitors to the island rose 77 percent. In the first months of 2016, Cuba's Ministerio del Turismo reports that 94,000 U.S. citizens had already visited the island (for comparison, last year's total number of American tourists was 161,000). Cuban officials expect these numbers to grow.


"Ten years from now, Cuba will be among the most popular destinations in the world," said Peter Sanchez, founder and chief executive officer of Cuba Tours and Travel. "Cuba has everything, from thousands of miles of pristine beaches, hundreds of islands in untouched archipelagos surrounded by protected coral reefs, mountains, rivers, rain forests and many beautiful, historic, cosmopolitan cities with deep culture roots and contemporary entertainment and culinary scenes. You can't see Cuba in one trip. It is too big and there is just too much to see and do. Tourism in Cuba 10 years from now will be going strong and it will be all over the island—not just the western region."

The article also describes all of the problems that are inherent with a visit to Cuba. However, I am used to hearing this as I am always one of the earliest into these new markets. I look at any problem as an opportunity to provide a service or goods at a profit.  

The same thing will happen in Cuba and billions will be made in the process. The place is starting from such a low base that over the next ten years the growth will astronomical. 

I expect the government there to slow things up because of their ideology and inexperience bu the cat is out of the bag. A younger population will taking leadership over the next few years and they want a higher standard of living. If you can ride the inevitable ups and downs I believe you can make money in Cuba.

I am speculating on the Cuba economy via my small holding in Cuba Ventures (CUV.V) which has many Cuba specific travel related websites that get millions of viewers per month. They are in the process of monetizing this traffic. I am also looking for additional ways to play Cuba.




Wednesday, August 24, 2016

Vietnam's FDI Jan-Aug rises 9% y-o-y

Reuters:

Actual foreign direct investment (FDI) inflows into Vietnam reached an estimated $9.8 billion in the first eight months of this year, up 8.9 percent from a year ago, the Planning and Investment Ministry said.

New FDI pledges in the January-August period rose 7.7 percent from a year ago to $14.4 billion, with most of the funds going to manufacturing, processing and real estate projects, the ministry said in a report posted on its website on Tuesday.


Vietnam is forecast to receive FDI of up to $15 billion this year, after getting a record high $14.5 billion in 2015, buoyed by strong economic growth and the finalisation of several free-trade accords

Good news for Vietnam's already booming economy.



Tuesday, August 23, 2016

Oil demand is relentless and so is depletion

OilPrice.com

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The fundamentals also are supportive of oil prices. Non-OPEC production is on steady decline. Demand growth is relentless, moving up more than a million barrels per day each year. This world will soon be consuming over 100,000,000 barrels of hydrocarbon based liquid fuels and feedstock daily. It is clear that the price of oil cannot stay under $50/Bbl much longer because producers cannot meet demand at that price.


OPEC only supplies about 40% of global oil demand. Outside of the Middle East there are only a few places where oil reserves can be developed profitably for under $50/Bbl. We are lucky to have a few of them in the United States.

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During the first six months of this year, the energy sector’s weighting in the S&P 500 dipped below 7%. There has never been a time when the energy sector’s weight has dropped below 7% and the sector did not outperform the market over the subsequent three years. This is not going to be the first time it happens.

As I have highlighted in many blog posts oil demand in the emerging markets and frontier markets is raging ahead. As people become wealthier they buy cars and once they buy a car they do not put it in the garage they drive it which means more demand. 

No one really talks about depletion. Without even talking about how drastically shale oil wells deplete the overall depletion rate for the world is 6% per year. That's nearly 5 million barrels per year of new reserves that has to developed and brought online in addition to demand growth of 1 million barrels per year. 

With investment in new production way down with the price we are talking a when event not an if event regarding higher oil prices.

The stat from the article about energy's weighting never having dropped below 7% and then energy stocks not being higher three years down the line is intriguing also. 

As long as the world economy does not have a world wide depression than oil prices are heading higher over the next couple of years. 

India's growth rate to accelerate in 2017

Forbes:

Ind-Ra, India Ratings and Research, has raised its growth forecast for India’s GDP in the financial year 2017 (so, part of 2016 and part of 2017) to 7.8%. This is a small rise from the 7.7% previously forecast. As we’ve noted before India’s growth rate is impressive and as we’ve also noted before that it is so reliant upon, so influenced by, the monsoon is a sign of how far there is still to go. 

I have found a new company that trades in Canada that has made significant investments into India and is run by the "Warren Buffet" of Canada. I will be writing more about this and discussing this more in this weeks podcast. 

Sunday, August 21, 2016

Podcast on Ukraine Investment trip

Link to podcast

Here are the websites of the ag companies I discuss in the podcast:

Kernel http://www.kernel.ua/en/

Agroton http://www.agroton.com.ua/en/

Avangardco http://avangardco.ua/en/

These can all be traded through US brokerage firms like Fidelity or Interactive Brokers

Here is the property I am considering buying into

http://www.uaproperty.com/ua-offers/central/kiev/new-build-apartments-for-sale-in-kiev/




Adding National Oilwell Varco (NOV) to the portfolio

Earlier this year when I said I though oil had bottomed I suggested buying best of breed shale driller EOG Resources. That particular pick is now up approximately 20% and I expect even more as oil prices head higher over the next few years.

I have talked before about buying the Levi Strauss businesses. These are the companies that sell the tools to extract natural resources to the drillers and miners. This is how Levi Strauss made his fortune. This is what NOV does.

In this vein I am adding National Oilwell Varco (NOV) to my portfolio. NOV is a full service oilfield equipment and service supplier. They build rigs, service rigs, provide various completion services, and basically are involved in all facets of drilling and completion of oil and gas wells.

Due to the drop in oil prices and capital investment cuts by oil and gas exploration companies you can imagine that NOV's business has suffered. In fact they have lost money the last three quarters and has seen its stock price drop around 60%.

However, as I have argued in the past these commodity markets are very cyclical markets and I believe that the lack of investment in new production will eventually lead to less supply and higher prices. Eventual higher prices will lead to a cycle of drilling and investment into new wells being drilled. This is a certainty as it has been for the last 100 years. Booms follow busts in the oil patch.

So the basic idea is that we buy now in anticipation in a recovery in oilfield activity which will eventually benefit NOV's various businesses. What I like about NOV is it is the best of breed. It is large company and it will be survivor and will be around for the next upswing in the oil market.

Although we are not likely to catch the exact bottom we do know that we are seeing some initial signs of a turnaround in the oil market. This is what being contrarian is all about. If one waits until everyone is convinced of a definite turnaround the stock will have already moved in anticipation of the recovery. In fact, we are already seeing the stock move higher in the chart of NOV as it appears to have put in a bottom.

The company has been very aggressive in downsizing and laying off people and closing offices during the downturn. This will probably continue for the next several quarters. However, the company is in no danger of going away and the management has said it will be looking to acquire other oilfield services companies during this downturn.

This is currently a high conviction speculation on an eventual rise in oil prices which leads to an increase in drilling activity. Oil after all is a depleting asset and every barrel produced has to be replaced. With low prices that has not been happening. Hopefully we have our timing right and we close to the bottom for this cycle.

India Unleashed

Time:

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Late on Aug. 3, after a debate lasting almost eight hours, Indian lawmakers approved plans for a major economic overhaul to turn the country into one unified market in which businesses can trade goods and services across state lines without having to navigate a prohibitive array of federal and local taxes. In what has been billed as the most significant reform since India opened up its economy in 1991, the measure is aimed at sweeping away a maze of levies that have hampered economic growth by making it harder for businesses to expand nationwide.

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By simplifying the system, India, already the world’s fastest-growing large economy, could see growth rise by as much as 2%. The successful passage of the so-called Goods and Services Tax (GST) bill is a big win for Prime Minister Narendra Modi, who has been criticized for not doing enough to reform India’s economy since he came to power in 2014. Here is what you need to know about the landmark reform.

I owned Indian stocks about a year ago but sold them for a profit as the initial euphoria over Modi's election wore off and change seem to be stalled. However this is pretty big news and although it will take some time in implementing this is the type of change that liberalizes an economy and allows it to become unshackled and to grow. 

The reason I find this news worthy is that India is very close to becoming the new China as far as growth and commodity consumption are concerned. India is a democracy and has other issues that China does not have but it is growing around 7% and if the country continues to liberalize than we should even more growth and infrastructure spending as the country is way behind in this category. 

For the first quarter 2016 India’s GDP grew by an astounding 7.9%, which was an impressive 60-basis-point increase over the 7.3% year-over-year growth reported for 2015. Such impressive economic growth now sees India on track to exceed the 7.5% forecast by the IMF for 2016.

This highlights that India’s economy is growing at a faster rate than China’s. For 2015 China’s GDP growth slowed to 6.9%, which was its lowest level in 25 years. Then on top of this, its GDP growth for the first and second quarters 2016 fell even further to only 6.7%, its slowest rate of quarterly growth since the global financial crisis.

Secondly, the lack of investment in India’s mining sector, along with a shortage of vital commodities such as coking coal, is expected to drive significantly higher demand for imports.

We will not see the same type of boom we saw from China. Nevertheless after a five year bear market the increased demand from India and other SE Asia countries (Vietnam, Thailand, Indonesia) could reignite the embers of a depressed commodity market. 



Friday, August 19, 2016

NagaCorp reports second quarter earnings

NagaCorp website:

Net profit increased by 24% to US$125.2 million

VIP rollings increased by 26% to US$4.5 billion

Mass Market table buy-ins increased by 17% to US$305.6 million

Mass Market EGMs bills-in increased by 18% to US$741.8 million

Basic earnings per Share of US cents 5.51


An interim dividend for Shareholders and a distribution for the holder of the Convertible Bonds of US cents 2.77 per Share/Conversion Share (or equivalent to HK cents 21.47 per Share/Conversion Share) has been declared, representing a payout ratio of 60% based on the net profit generated for the Period. The interim dividend and distribution shall be paid on Tuesday, 13 September 2016

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The Cambodian economy continued to register stable growth. The International Monetary Fund is projecting Cambodia’s real Gross Domestic Product to grow at 7% in both 2016 and 2017, with an inflation rate of 2.1% and 2.8%, respectively. Visitation to Cambodia continued to grow with international arrivals increasing by 2.4% to 2.0 million visitors in the first five months of 2016 compared to the same period in 2015. 

Visitor arrivals to Phnom Penh International Airport increased by 10% over the same period. The top three countries where visitors originated from were Vietnam (19%), China (16%) and Korea (8%), together accounting for 43% of total arrivals to Cambodia. In particular, visitors from China increased by 12% year-on-year to 325,206 visitors during the first five months of 2016 (Source: Ministry of Tourism, Cambodia). Visitor growth continues to be one of the growth drivers of the Group’s business.  

As you can see 16% of visitors to Cambodia are from China and amazingly 19% are from Vietnam. As these countries become wealthier and their middle class continues to develop they will be traveling more and more. This should benefit Cambodia's tourism industry and NagaWorld. The company continues to increase earnings and has a commitment to pay out around 60% of earnings as a dividend. I will continue to hold.

Thursday, August 18, 2016

Alterra Energy reports earnings. Stock price in stealth blowoff since early summer

Alterra Energy:

Revenue was $13.8 million for the quarter, up 2% from the comparative quarter primarily due to the strengthening of the Icelandic Krona.

The Company recorded net income of $3.4 million, down from the comparative quarter ($6.8 million), resulting primarily from changes in non-cash items such as the change in fair value of holding company bonds (Sweden).


Consolidated cash and cash equivalents at June 30, 2016 was $11.7 million of which $9.1 million is held in the Company's Icelandic subsidiary ($10.3 million and $6.4 million respectively at December 31, 2015).

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Continued strong generation at Toba Montrose: Toba Montrose achieved record second quarter generation at 121% of budget, an increase from the comparative quarter (118% of budget).

Deep drilling project at HS Orka: The last major contract was signed for a 5,000 meter deep drilling program at the Reykjanes plant in Iceland. The rig has been deployed to site and drilling will commence in August.


Jimmie Creek project completion: Construction of the 62 MW hydro project was completed on time and within budget with first test power generated on June 10, 2016. Jimmie Creek commenced commercial operations on August 1 and began selling power to the British Columbia Hydro and Power Authority under a 40-year power purchase agreement.

The company continues to operate its existing assets at a high level while bringing on new generation on budget and on schedule. Listening to the conference call a couple of the analysts were asking management about instituting a dividend. Management gave the standard answer that it is under consideration by the board but that they are not going to confirm or deny if or when they would proceed. Nevertheless, something is going on as the company shares have advanced about 50% over the last few months.

Something is up here?

I will continue to hold this stock.

Romania economy growing 6%

Business Review:

Analysts at Nomura investment bank have upgraded the economic growth outlook for Romania, after the National Statistics Institute (INS) said the country has registered a 6 percent hike in output in the second quarter against the same period of last year.


The bank now forecasts that the Romanian economy will expand by 5 percent of GDP. In its previous estimate, the financial institution had put Romania’s growth outlook at 4.5 percent of GDP.

The Romania economy is the fastest growing economy in Europe. However the growth in the economy has not translated into higher stock prices yet. Nevertheless, this is good news for my holdings in closed end fund Fondul Proprietatea. The fund is still selling at an almost 30% discount to net asset value. plus you get around a 6% dividend while you wait for the gap in value to close.
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