Investment Article
Australian Natural Resources Stocks
Enclosed are three Morningstar reports on Australian Natural Resource stocks. In my opinion, Australian stocks in this sector are well positioned for growth in the future. Please allow me to explain why.
Although Australia ranks only fifty-fifth in the world in terms of population size, its GDP ranks fifteenth[i]. The iShares MSCI Australia Index has returned 135.49% in the last ten years, compared to the S&P 500 Index which returned 10.99%. The Australian dollar gained 29.74% on the U.S. dollar over the same period[ii]. Australia is rich in many natural resources, including oil, gold, agricultural products, diamonds, iron ore, uranium, nickel, and coal. This sector is one of Australia’s main economic drivers, with mining and agricultural products alone accounting for a combined 17% of GDP[iii]. Many Australian natural resource companies pay attractive dividends in the four to five percent range, with some paying more than seven percent.
Australia’s proximity to vibrant emerging Asian markets such as Indonesia, India, China, Japan, and South Korea has helped fuel their economic expansion. For example, the Australia-China Agricultural Cooperation Agreement, which went into effect in 1984, underlines the focus on developing and enhancing trade relationships between the two countries[iv].
When purchasing Australian stocks, one statistic we consider is the Return on Equity (ROE), also known as the Return on Investment (ROI). This is a measure of the company’s profitability, calculated by dividing net income by shareholder equity. A corporation’s ROE shows how much profit it generates with the money shareholders have invested, and is especially useful when comparing stocks in the same sector or industry. It is a good indicator of both the efficiency of the company and the extent to which it is over or undervalued. This is just one factor we take into consideration when deciding which stocks are best for our clients.
At Armstrong Advisory Group, we manage wealth for affluent and educated families. You will find three Morningstar research reports enclosed with this material. Please understand that we are not recommending all of these stocks today. We would like to extend to you the opportunity to have your current investment portfolio reviewed. During this review process we will help you determine if any of these three Australian Natural Resources stocks would be appropriate. Our minimum household account size is $250,000. Please call (800) 393-4001 if you would like to have your portfolio reviewed. For our complete database of articles please go to www.armstrongadvisorygroup.com.
[i] https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html
[ii] www.google.com/finance. 31 Oct 2011.
[iii] http://adl.brs.gov.au/data/warehouse/pe_abares99001762/ACS_2010.pd
[iv] Australia-China Agricultural Cooperation Agreement (ACACA) - DAFF." Home - Department of Agriculture, Fisheries and Forestry. Web. 26 July 2011.
Securities offered through Securities America Inc., Member FINRA/SIPC and advisory services offered through Securities America Advisors, Inc. Armstrong Advisory Group and the Securities America companies are unaffiliated. Representatives of Securities America, Inc. do not provide legal or tax advice. Please consult with a local attorney or tax advisor who is familiar with the particular laws of your state. 10/11
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