I clicked through the constituents of my Autonomies Favourites section this morning to get a feel for how the sector is performing. A number of shares such as NuSkin Enterprises continue to extend their advances but are becoming increasingly susceptible to mean reversion. On the other hand, a considerable number are now either finding support in the region of their respective 200-day MAs or just breaking out to new highs. 

"Hope all is well with you and yours?

"Could you ask either David or Eoin what selection/filter process is used to include a stock in the Autonomies list?

"All the very best to you all for the forthcoming festivities.

"Many thanks"
 

 

Thank you for this question which may be of interest to other subscribers. We began developing the Autonomies theme as early as 2011, as we identified a confluence of factors that were giving an advantage to truly global companies. I wrote extensively on this subject in my book Crowd Money but let me summarise.  

The rise of the global middle class is a secular development and represents the greatest poverty reduction in human history not least because it is focused on the world¡¯s major population centres. The corollary is that as more people have disposable income at the end of each month, both their needs and wants evolve. Companies with the ability to tap into this tide of rising demand for just about everything are therefore in a very favourable position. 

Global sales of chocolate confectionary will gain 2.1 percent to a record 7.3 million tons next year, after a 2 percent gain in 2013, estimates Euromonitor International Ltd. Sales in China more than doubled in the past decade, outpacing gains in Western Europe, the biggest consumer. Tighter supplies will mean higher costs for food makers including Nestle SA, Barry Callebaut AG and Lindt & Spruengli AG.

"Demand for chocolate is great" said Ashmead Pringle, the president of Atlanta-based GreenHaven Commodity Services, which oversees about $340 million. "A lot of the world population is moving to the middle class and will have more money to spend, in particular in emerging markets and Asia"

 

Cocoa exhibits one of the firmer chart patterns within the commodity complex and has been supported by disappointing crops in West Africa as well as continued growth in demand. Since the life cycle of the cocoa tree involves five years from sapling to pod production, increasing supply represents a medium-term challenge. 
 

Unless the condition is controlled, the consequences are very unpleasant. Complications include problems with the eyes, kidneys, cardio-vascular system and the nervous system. The mortality rate for sufferers under 60 averages 28 per cent in Europe, 38 per cent in North America and the Caribbean.

The root cause is well known. Most people who develop the more common form of diabetes, type 2, are eating more calories than their bodies are using.

According to the US Centers for Disease Control, diet and exercise changes can more than halve the risk of pre-diabetic conditions such as elevated blood sugar content developing into diabetes type 2.

Diabetes cannot be cured, but it can be controlled through weight loss, low-carb diets, exercise, and a range of medical treatments.

The most important drug is synthetic insulin, which is injected into the bloodstream to compensate for the shortage of the pancreatic hormone.

Diabetes is a global epidemic, particularly for people whose ancestors subsisted on a scarcity of calories. This is particularly poignant for India and China where rising incomes are fuelling growth in snack foods with high sugar content. Since the disease is a chronic condition rather than something that can be cured, it can also be considered a growth industry, regardless of how personally distasteful that way of viewing the world might be. 

Bond mutual funds are headed for record redemptions in 2013 amid signals the U.S. Federal Reserve will reduce its stimulus.

Investors have removed $70.7 billion so far this year from bond funds, TrimTabs Investment Research said today in an e-mailed statement. Unless the trend reverses, the redemptions would surpass a record $62.5 billion that investors removed from bond mutual funds in 1994, according to TrimTabs.

Investors have been pulling money from bond funds since May, when Federal Reserve Chairman Ben S. Bernanke first hinted that the central bank might begin scaling back its unprecedented asset purchases. The yield on the 10-year Treasury note is 2.8 percent, up from 1.93 percent on May 21, the day before Bernanke spoke about the possibility of tapering its stimulus.

“The ‘taper talk’ that started in May proved to be a huge inflection point for the credit markets,” David Santschi, chief executive officer of TrimTabs, said in today’s statement, which didn’t provide details of redemptions across various categories within fixed income.

Bill Gross’s Pimco Total Return Bond Fund (PTTRX), which lost its title as the world’s largest mutual fund in October, had its seventh straight month of withdrawals in November as investors continued to flee bonds. The $244 billion fund suffered $36.9 billion in estimated redemptions in the first 11 months of the year, according to Chicago-based Morningstar Inc.

Eoin and I have been mentioning the new risks in holding bond funds, not least the fact that they offer no yield to maturity for investors, now that the bull market in terms of a secular decline in yields is over.

“In view of your comment about buying autonomies low.

“In practice it's so difficult to interpret what is causing them to be low! Take a look at Experian (EXPN on LSE).  Do I say "no this has clearly lost its upward trend consistency, keep away" or "here is a unique opportunity to buy this autonomy low"? 

The recent downdraught was caused by a sell rating from Goldman Sachs, fearing lower growth.  Other analysts have buy ratings.  What to do?

“In the past I have been guilty of always buying into good trends, which then topped out and went down. I am a little afraid to get into the opposite habit now of ignoring the good trends because the shares are too extended, and just buying losers.”

Thank you for an interesting question of general interest.  You will appreciate that your questions are more challenging after a bull market of five year’s duration, albeit from a very low level.  In other words, the risks are higher today, any way you chose to measure them.

Warren Buffett isn¡¯t just a great investor. He¡¯s the best investor, an economic study has found

An index measuring returns adjusted by price fluctuations shows the billionaire chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A) has done better than every long-lived U.S. stock and mutual fund.

The ratio is also larger than all 196 U.S. mutual funds that have been around for 30 years. The median Sharpe ratio for them is 0.37.

The review of Buffett¡¯s investments concluded he has been rewarded for his use of leverage, coupled with a focus on cheap, safe, quality shares.

The study said Buffett is willing to take on borrowing to finance investment, then picks stocks that have low volatility, are cheap -- with low price-to-book ratios -- and are high quality, meaning they are profitable and have high payouts.

By breaking down Berkshire Hathaway¡¯s portfolio into ownership of publicly traded stocks versus wholly owned private companies, the authors also found the tradable equities performed best. That suggested to them that Buffett¡¯s returns are due more to stock selection than to the pressure he puts on companies he has stakes in to improve their management.
¡°Buffett¡¯s performance appears not to be luck, but an expression that value and quality investing can be implemented,¡± said Andrea Frazzini and David Kabiller of AQR Capital Management LLC and Lasse H. Pedersen of Copenhagen Business School. ¡°If you travel back in time and pick one stock in 1976, Berkshire would be your pick.¡±

Informative article on Warren Buffett

Once the Grand Cayman-based company completes its three- year audit in the next 60 days, it will be able to access capital markets and borrow 2.5 times earnings before interest, taxes, depreciation and amortization, he said today in a Bloomberg Television interview with Stephanie Ruhle.
     
“We’re catalyst-driven investors, and in this case the catalyst is coming in the next 60 days when they have their three-year audit done,” Bass said, adding that Herbalife is a business that generates “significant” cash flows, has no debt and is growing. Dallas-based Hayman owned about 436,000 Herbalife shares, or 0.4 percent of the stock outstanding, as of Sept. 30, according to data compiled by Bloomberg.

Herbalife has recently been under scrutiny amid allegations by hedge-fund manager Bill Ackman that the company is a pyramid scheme. While Herbalife has consistently denied Ackman’s claims, the activist investor last month said he will take his bet against the company “to the end of the earth.”

Few companies have gained such notoriety as a result of their sales strategy as Herbalife, but regardless of whether one agrees or not, there is no denying that the company makes money.

 I wrote about Fedex and UPS last week in the context of companies benefitting from continued growth in ecommerce. On my morning click through of markets, I was reminded of this on seeing Denmark's outperformance and the fact that it plays host to some of the world's largest shipping and logistics companies. 

DSV has a relatively similar pattern to the KFX Index and is among the world's larger logistics companies. A break in its progression of higher reaction lows would be required to question medium-term scope for additional upside. 

“I wonder if there is a more up to date list of Autonomies that the ones on the forum.”

Wondered whether you had seen this.

Best wishes and thanks for the service

Thank you for these educative infographics which highlight some of the most dominant Autonomies in the consumer sector. I was also particularly impressed by the graphic displaying the consolidation of the US banking sector.

Bayerische Motoren Werke AG (BMW)'s bid to save its cars from potential extinction starts with hundreds of thousands of fine white strands snaking upwards in a production hall in ruralWashington.

Looped through an almost mile-long course, what looks like the world's thinnest rice noodles will be stretched, toasted and eventually scorched black to create carbon fiber -- a material thinner than human hair and yet tougher than steel.

BMW will use the sleek, black filaments for the passenger frame of the i3 electric car, which goes on sale at dealers inGermany tomorrow and around the world in the coming months. It's the first effort to mass produce a car made largely from carbon fiber and represents the biggest shift in automobile production since at least the 1980s when the first all-aluminum car frames were made.

The strategy started taking shape six years ago, as Norbert Reithofer, then the newly appointed chief executive officer, examined trends affecting the industry and concluded that increased environmental awareness would likely prompt tougher emissions regulations that could make the future of autobahn cruisers like the 5-Series sedan unsustainable.

"Looking forward to 2020, we saw threats to our business model," Chief Financial Officer Friedrich Eichiner, who was head of strategic planning at the time, said in an interview in his sparsely furnished office in BMW's landmark four-cylinder headquarters building in Munich. "We had to find a way to bring models like the 6-Series, 7-Series and X5 into the future."

For BMW to continue to sell cars that live up to the company's "ultimate driving machine" claim, the manufacturer needed to offset those emissions with a viable electric vehicle for growing cities, where more and more potential customers would live. That was the start of the i3.

At the time, electric cars had the reputation of being sluggish because of the heavy battery needed to hold a charge capable of moving the car at least 100 kilometers (62 miles) -- the range considered necessary for daily use. That meant the car needed to be lighter to reduce the size and cost of the power pack and improve handling. The lightest and strongest material available is carbon fiber.

There are a number of interesting points in this article which the introduction above only begins to touch on. For instance, why build a $100 million plant at Moses Lake Washington, a little town of approximately 20,000 people? Well, the local utility charges only 3 cents per kilowatt hour for hydro-power to run the plant's energy-hungry ovens and furnaces. Bloomberg says this is less than one-fifth the cost of fuel in Germany. The town is also also appears to be reasonably close to a port.

The generic drug sector is dominated by a relatively small number of countries not least India, Israel and the USA. Heightened currency market volatility is likely to be of benefit to Indian manufacturers since the Rupee's weakness will enhance consolidated earnings for these global businesses.

Among foreign listed Indian generic drug makers Ranbaxy has a listing on London's International Exchange and generates 81% of its revenue from outside India. The share has fallen from $14 to $4 since 2010 and posted a large upward dynamic last week. It is currently unwinding its overextension relative to the 200-day MA but will need to find support at progressively higher levels if recovery is to be given the benefit of the doubt.