Friday, April 27, 2012

Mayer, World Right Side Up

Investors in international markets would do well to read Christopher Mayer’s World Right Side Up: Investing Across Six Continents (Wiley, 2012). It is a thoroughly researched, carefully crafted book with a host of investing ideas.

Mayer, an inveterate traveler himself, takes his reader on an investing journey to Colombia, Brazil, Nicaragua, China, India, the Emirates, South Africa, Australia and New Zealand, Southeast Asia (Thailand, Cambodia, and Vietnam), and, in a potpourri chapter, Mongolia, Argentina, Russia, Turkey, and Central Asia. And finally back to Canada and the United States.

I debated what country I should highlight in this review. My first instinct, for purely sentimental reasons, was South Africa; I began my investing career many moons ago in an effort (yes, it was successful) to finance a trip to Africa. But in large measure because of the complex social and political risks in the region, Mayer wimped out and recommended a fund, admittedly an incredibly successful one (the Africa Opportunity Fund). So I moved on.

Then there’s Mongolia, which is rich in natural resources and “sits next to the world’s most voracious consumer of those resources, China.” (p. 209) In 2010 its stock market was the best performer worldwide, up 125%. For those willing to venture into pink sheets and to chase momentum, Mongolia Growth Group is a possibility; it focuses on everything except mining.

Well, call me stuck in the mud, but I’ve decided to return to North America and introduce you to, if you aren’t already familiar with, pulses. Pulses are “crops harvested for the dry seed. They include lentils, chickpeas, peas, and a variety of beans. They are an efficient source of protein by weight, giving you almost as much protein as chicken and more than beef. … Most importantly, pulses require far less water. It takes only about 40 gallons of water to produce one pound of pulses. Compare that to the nearly 2,000 gallons of water to produce one pound of beef.” (p. 238) Oh, and did I mention, they’re inexpensive, good for you, and very tasty. And, as every home gardener who grows peas knows, they have nitrogen-fixing properties, so they naturally replenish nitrogen in the soil. “Since nitrogen fertilizers make up half the energy costs of most North American farms, planting pulses makes good sense.” (p. 239)

With demand for pulses growing in the emerging markets, they are a promising investment story. But how exactly does one play the pulses? Mayer recommends Alliance Grain Traders (TSE: AGT), a Saskatchewan-based company that is one of the largest lentil- and pea-splitting companies in the world. Its stock performance over the course of the last year has been dismal, but Mayer suggests that AGT “is not a quarterly earnings story; this is about long-term wealth creation.” (p. 242)

World Right Side Up is a stimulating read. It gets the investor on the “right side” of global trends and offers up some ways to play these trends. I thoroughly enjoyed it.

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