2015 Marks the Beginning of the Next Great Aussie Stock Boom

On 10 of November We made comment about the issues of BHP Billiton [ASX:BHP]. This came as news was still breaking concerning the collapse of the tailings dam in Brazil.

From my perspective this was as significant to BHP as the Gulf oil spill was to BP [LON:BP] in This year.

At the time I said,

‘Will BHP’s stock price halve from here? We doubt it, but you can expect there to be some further falls from here. In fact I expect that BHP will go sub-$20 this week.

‘At this type of cheap price though, is it time to buy BHP? No, I don’t believe so, not just yet. Expect more pain over the next few months.‘

Well, as it stands, I had been right. But to be honest I was also wrong. I thought BHP might fall further. But not this particular far, and not so fast.

At the close on Tuesday it was buying and selling at $17.05. There’s a pretty good chance that by the time this goes in order to publication it will be sub-$17. That’s close to ‘crazy town’ in my book. And speaking of ‘book’, which puts BHP pretty close to buying and selling at one times book value. But that’s another story…

The point here is that the big end of town tend to be battling. BHP, Rio Tinto [ASX:RIO], all of the ‘Big 4’ banks, Telstra [ASX:TLS], Woolworths [ASX:WOW], all of them are having a pretty average year.

It’s pretty easy to be bearish on the market and on the Aussie economic climate. My colleague Greg Canavan, Editor of investment advisory Crisis & Opportunity, is pretty open regarding his bearishness on the economy.

We certainly both agree that everything doesn’t look great right now. And we also both agree on another point. Just because things are bad does not mean you have to be blind to major market opportunities.

Greg once said to me, ‘It’s not a stock market. It’s a marketplace of stocks.’ And he couldn’t be more accurate.

What it boils down to is the ability to know where to look. You see, the biggest stock gains can come at the most unlikely times, from the most unlikely locations.

For example there’s one small, hated mining stock, that climbed 1,200% in the Twelve months to November 2015 while the ASX dropped 9%.

What seemed like an ugly, bad expense quickly transformed every $5,Thousand worth of shares into $65,000. We call stocks running like this ’10-bagger’ companies.

The big question is where will the next one come from? I’ve been chatting to Greg about it as well as he’s confident he knows exactly where. And he’s letting his subscribers to Crisis & Opportunity in on the secret.

Diversity is the most beautiful thing

The beauty of the ASX is that it’s incredibly diverse. You can find a company in about any industry you can think of to invest in. Evidently this diversity comes through pure numbers. And of the 2,209 shares on the ASX 2,009 of them can be found outside the ASX 200.

That leaves a pretty big playground for investment. It also opens up a very big opportunity for gains in companies that you just can’t find in the ASX 200.

And because of an announcement last week from the Authorities, there’s one particular (albeit very broad) industry that I believe might see the kind of increases that Greg’s tiny, hated exploration stock saw this year.

The Federal Government’s ‘Innovation Agenda’ is one of the more promising political developments I’ve seen for a while. For one, it’s possibly the very first time a government has truly committed to the long term prosperity of Australia.

Not many governments wish to put in place policy or daily activities that will ultimately benefit long term governments, rather than themselves. However the new innovation agenda will do precisely that — assuming the federal government delivers on its goals.

The innovation website explains the concept is to,

‘[Back] our entrepreneurs by opening up new sources of financial, embracing risk taking on innovative ideas, and making more in our public research.‘

As the government correctly points out,

‘Innovation is at the heart of a strong economy — from IT to healthcare, defence and transportation — it keeps us aggressive, at the cutting edge, creates jobs and maintains our higher standard of living.’

My only gripe is this all comes about a decade too late. This should have been?on the plan while the commodities boom was at full swing.

A ‘hedge your bets’ scenario. The problem was all previous leadership bet the house on the commodities boom lasting forever. And we all now understand how that panned out.

At least now the government is finally taking science and technology seriously. It’s the only way Australia will become productive as well as competitive in the future. It is the greatest chance we have to continue to improve standards of living and secure future economic success.

The beginning of the next great Foreign boom

One of the key points on the plan is ‘advancing quantum computing technology’. I can’t even believe these words are coming from the government!

Quantum computing (as I’ve been saying for a while) will lead to the next great period of humanity. It will speed up technological development faster compared to anyone can imagine. It’s so important to future economic success when it was the only project on the innovation agenda, that would be fine with me.

If Australia can help grow globe leading quantum computing businesses, we will streak ahead of other economies. But it’s a hot race. Every major economy around the world is developing this technology. At least we’re part of the race now.

And there are more items on the innovation agenda, which is exciting to see. These include the ‘Cyber Security Growth Centre‘ and ‘Data61: Australia’s Digital and Data Innovation Group‘.

This is all great news for technology stocks. And it’s the wide and vast world of small, innovative and exciting technology stocks where I think traders will reap the biggest rewards.

The innovation agenda could lead to an ‘ideas boom’ for Australia. It could help develop some of the world’s most enjoyable technologies. It could turn companies with small market hats in the tens of millions in to tech giants worth many billions.

It’s a bit early to see how it will play out. But when it goes the way I think, we could be at the very beginning of the boom that makes the former commodities boom look tiny.

Regards,

Sam