“Commonwealth Shares — Profiting from Privatization”

By Travis Johnson, Stock Gumshoe, November 29, 2007

The folks at Stansberry and Associates have come out with a new newsletter, perfectly designed to focus on exactly what everyone seems to want right now: Foreign Stocks. This one is called International Strategist, and they’ve got a teaser campaign designed to get you on board with a trial subscription.

The teaser campaign is generally going out with two different headlines, one is “Worried Americans Tap into British Gov’t-Issued ‘Commonwealth Shares'” and the other is the somewhat more colorful, “My British Uncle Albert’s Filthy Rich Retirement Secret…”

As with many of the finer teaser from the folks at S&A, this one has a couple levels of complexity to get our juices flowing and build up the eager greedies in our minds.

The first part of the teaser is that whole notion of “Commonwealth Shares,” which they do sort of explain eventually, though I wouldn’t blame you if you chose not to read that far. They say that these British commonwealth shares were created in 1979 by a Thatcher program, and that they were opened up to foreign investors a bit later on, in October of 1986, to the enrichment of many.

They give plenty of examples, as usual, of folks who got rich from this investment — including one Erin Herrara, who reportedly told the Chicago Tribune that “it was so easy” to turn $200 into $5,000 and change.

I’ll buy that, as long as by “easy” they mean “saving for years and years and being patient.”

So these Commonwealth Shares, it becomes clear, are simply shares in companies that were privatized by the British government during the Thatcher reforms of the early 1980s — and, thanks to monopoly positions, government support, and an eager nation of investors, they certainly did very well. These were the old national companies that ran things like the railways, the telephone system, etc., and were gradually sold off to the public to be run, as they generally have been for many more years in the US, as public corporations.

And the stocks of many of these companies did indeed certainly do remarkably well — they give a few examples from the privatization in the UK (45,000% gains from British Gas, 62,714% from British Airways, etc.), and they cite a few reputable sources, though with just snippets of quotes, that back up their claim to some degree … here are a few of those:

“Quick easy money” — The Guardian.

Americans will be “drooling at the prospect” — Forbes

and

The “potential payoff is so large that it … promises to produce some of the decade’s best investment opportunities” — Fortune

But essentially, the riches from privatization in Britain have already been made — and there are certainly some concerns about the UK economy, seeing as how it relies at the moment on a very familiar foundation for us Americans, easy business and consumer credit and a wildly booming housing market. So they’re not urging us to rush out and buy British Airways or any of the other privatized industries, monopoly or no, in the British Isles.

No, they take it to the next level — and, as we follow the logic, they expand it to the rest of the commonwealth, the greater universe of old British colonies and places that generally followed the British tradition. Places like Canada, Australia, the UAE, Hong Kong, etc. They give some examples of how well this works, too, with the privatization of Cameco and Potash, among others that went public a bit more recently in Canada (and I expect we all know how spectacularly those two companies have done in recent years, with Cameco enjoying the uranium resurgence and Potash riding the agriculture/fertilizer boom).

And they also sneak in a teaser for one of the other privatized Canadian companies that has been around since 1832 and consistenly paid and raised dividends — just to give you a quick freebie, that one has to be Scotiabank.

And then we get to the real tease, the new ideas that we’re being teased with … if we’ll just sign up for a subscription. The newsletter isn’t all that expensive, I think it’s $99, but really, if you just want to know the name of a teased company or two, well, the Gumshoe’s your guy … and I won’t demand your $99. Not right now, at least.

So what are we actually urged to invest in now, to follow the strategy of these “commonwealth shares?”

Well, again that’s a two-parter. First, what’s the country?

They’ve selected a country that they think is the best place to look for “commonwealth share” investments. How do they describe it?

“What makes this place the best? Well, its economy’s growing even faster than China’s… the World Bank ranks this place as the #1 country in the world to do business, even safer and more credible than Britain or Switzerland… and it’s a longtime ally of America…”

And they mention that 1,300 US companies are setting up shop in this country as well, due to its business-friendliness. They even mention one specific one, a biotech company called Codex.

So … I don’t know if they’re trying to be sneaky or just had a typo, but the company is actually called Codexis, they’re based out of California and have a research center that they just opened in ….

Singapore.

Singapore has actually been ranked as the best place in the world for business for two years running by the World Bank, and some people call it the “Switzerland of Asia”, so they’re on pretty good ground there.

OK, so they believe Singapore is the best place to look for these “Commonwealth Shares.” Personally, I’m kind of with them on this — there are a bunch of Singaporean companies I like quite a bit, and I’ve considered buying the Singapore ETF recently in addition to my holdings in Keppel Corp, a Singapore conglomerate in the shipbuilding, real estate, and oil refining (among other) businesses. Just FYI, Singapore is largely a financial center so the ETF is very heavily weighted in banking.

But Keppel’s not the company they’re teasing here, nor are they pushing the ETF (though I think Robert Hsu has recently been teasing the Singapore ETF or a similar fund — the iShares ETF is EWS, and there’s a closed end Singapore Fund, too, that I’ve never looked at — ticker SGF). And God knows why you’d want to know which Singapore companies I like. No, they’ve got two other companies in mind, one in telecom and one in real estate.

The telecom one is teased thusly,

“a stranglehold on Telecomm throughout ALL of Asia, India, the Philippines, Singapore, Indonesia, and Australia – have been 3-times more profitable than Verizon over the past few years. According to company policy, they must pay out 40-50% of yearly earnings to shareholders as dividends, which they’ve done for 11 consecutive years. Not to mention, 4 enormous special dividends on top of that.”

That pretty nearly has to be Singapore Telecom (SGAPY for the 10:1 ADR on the pink sheets, which actually has pretty good volume), which is the big privatized wireline and wireless telecom company in Singapore — but, before you lose interest (Singapore isn’t itself growing quickly enough, or developing enough, to make their phone company a big grower), note that their international expansion is really the key for this company — they own big pieces of wireless companies in Australia, India, and all the other countries noted above. the Singapore market is growing at probably 1 or 2% a year for them, but the others are growing fast and furious and in some places they’re also taking market share. So that’s fairly appealing.

The dividend for this one is set, as with so many large foreign companies, as a healthy percentage of their income, so while it’s nice it’s not nearly as predictable as US dividends — if you say your dividend is just going to be 40% of earnings, that’s a different promise than the notion that you’ll have a steady dividend that goes up on an even path over time. Using the past 12 months as our guide, their current yield is something like 5 or 6%, but your mileage may vary. And the shares are down a bit from recent highs, so I’m actually a little tempted to dig deeper into this guy — I do like that they have strong pieces of the wireless business in India and Indonesia, two of the more populous developing Asian economies, and they seem to be a decent bet on my first glance. Maybe some more research ahead for me.

And how about the real estate one? Singapore embraced the REIT concept a bit later than the US did, but they did so with some real zeal, so there are quite a few strong REITs in the Singapore market, both domestic and regional operators.

The clues they give for this one are that it is focused on high end and residential real estate, and that it has paid a dividend consistently for 18 years, during which it has boosted the dividend 400%, and operates in some of the hottest countries in the region, including Singapore, China, Hong Kong, Thailand, Vietnam, Philippines, Malaysia, and Indonesia. They’ve also paid “special” dividends for 6 years in a row, generally pretty big ones.

I originally thought this might be Keppel Land, which is partly owned by Keppel Corp and does do luxury housing in all of those countries, but they haven’t paid dividends for quite 18 years or raised them to that extent, and they also operate in India and the Middle East, which would have been worthy of a mention. Nor does it seem to be CapitaLand, the biggest Singapore real estate company, or one of the listed REITs that they run.

And actually, I’ve run out of time so I need to cut it off there. I’ll keep checking up on which of the Singapore real estate companies this might be, or if someone else feels like chipping in on the research feel free to propose your solutions below.

Jim Jubak, who many folks like, has written about Singapore before, too, and generally has favored international investing — his favorite is DBS, a big bank, but he also mentions Singapore Telecom and some others in this recent article that makes a pretty decent case for investing in the country.

This is one place I’d love to visit — one of the smaller countries in the world, now that we’ve gotten a few centuries past the days of the mighty city states, and though it is technically a little island into itself, that’s really just by virtue of a river that separates them from the rest of the Malay Peninsula. So that’s our little geography lesson, Singapore is one of the world centers of shipbuilding and finance, and it has an enviable position on China’s doorstep that it has been profiting nicely from for years … and soon, they’ll have big casinos, too, what more could you want?

Oh, and just to note — the Singaporeans are not necessarily eager to lose control of everything. Companies I own shares in have been burned by the Singapore government on potential takeovers before, including Cemex’s thwarted attempt to buy Semen Gresik, their big cement company, and Seadrill’s possible plan to take over Apexindo, an oil services firm (both have since sold their holdings in those companies). I just realized that I’m a big giant idiot — I’ll leave this paragraph in here so you know what a bonehead I can be at times, but those are both Indonesian companies … they’re not based in Singapore, don’t know why I did that little brain freeze. Sorry.

To make up for that boneheaded paragraph, I’ll also let you know that Singapore is a hot exporter of one of the most talked-about things in the world these days: Sovereign wealth. Temasek is the name of the government’s sovereign wealth investment fund, and it owns chunks of many partially privatized Singaporean companies and is heavily invested in other large companies, particularly in Asia (with a strong recent focus on greater China) but also elsewhere in the world.

So … I left you hanging a little bit with the real estate one … sorry, will try to catch up to that one momentarily. But if you’re looking to investigate the “commonwealth shares” that S&A are teasing right now, Singapore, and especially Singapore Telecom is a place to start your research. Enjoy.

Want to keep up with the Gumshoe? Click here to subscribe now — free email alerts.

Leave a Reply

25 Comments on "“Commonwealth Shares — Profiting from Privatization”"

avatar

Anonymous
Guest
0
Anonymous
November 29, 2007 6:11 pm

As a British reader I had wondered about these “Commonwealth Shares” for a while. I bought British Gas on the initial float, and whilst they have been a great investment they haven’t yielded that big a gain – I feel the report writer may have not researched the original float properly, as you paid only 50p up front, with more installments in years to come.
I agree with the sentiments on Singapore, but UK in the 80’s was a very different economy from Singapore in the 2000’s – I wouldn’t imagine any give-aways now

Leo
Guest
0
Leo
November 30, 2007 11:04 pm
As a British reader I can tell you that this concept of “Commonwealth Shares” is a completely bogus marketing idea designed to make you pay a subscription fee for the newsletter. It’s just not true. There was a lot of easy money made on privatisations in the 80’s, but not any more. And certainly not the sort of profits suggested in this newsletter. I It’s just not smart to invest in a company in an ex British colony in 2007 because 25 years ago some people in Britain made some profit investing in a similar company in the UK. If… Read more »
Anonymous
Guest
0
Anonymous
December 18, 2007 4:21 pm

Thank you for straightening out the “Commonwealth Shares” question.

Great job.

Martin
Guest
0
Martin
March 23, 2008 12:05 am

Great to rely on some reliable journalism.

thank you

Michael Shepherd
Guest
0
April 17, 2008 1:07 am

Hi,
I am relatively new to Daily Wealth and wanted to get behind the hype.
I am glad I discovered you. Thanks!

sam jedidiah
Guest
0
sam jedidiah
April 17, 2008 9:37 am

thanks for the tip.i thank god we have someone like you.there all someone in your pocket.

Thomas Wee
Guest
0
Thomas Wee
April 17, 2008 1:17 pm

This is funny. I’ve been reading Gumshoe for a couple of months to make sense of all these teasers I’ve recieved and also to check out what great investment there are in Singapore and now I’ve come full circle; I live in Singapore! and yes, I did well in my SingTel shares.

We’re getting mobile number portability this coming June 13, and Singtel should gain (in the mid term) on that development.

Thanks Gumshoe! I’ll put my money back here 🙂

Mark
Guest
0
Mark
May 1, 2008 9:24 pm

Gumshoe ROCKS THE HOUSE. Period. Great work. We should get you on 20/20! 🙂

Yoke Mui
Guest
0
Yoke Mui
May 7, 2008 9:47 pm

Thanks for giving out the truth on the Commonwealth shares. My Question is should I just relegate Daily Wealth to spam??

David Robertson
Guest
0
David Robertson
May 8, 2008 5:10 am

I have just started receiving Daily Wealth and as a complete novice was quite impressed by his articles – he is certainly a convincing writer. Fortunately I decided to do a little bit of research and as you suggested, the author does over-egg his claims, which you kindly confirmed. Many thanks.

Gravity Switch
Admin
11
May 8, 2008 9:05 am

I like reading Daily Wealth — it’s free, and it has lots of ads for newsletters for me to peruse … but probably not everyone has the same affection I do for newsletter spam. Your call. Some of the articles are useful and analytical, some are just puffery selling one of their newsletters … not much different from most of the “free” investing emails out there.

Lois Haynes
Guest
0
Lois Haynes
May 29, 2008 11:05 am

Am glad I have friends in the UK who saved me from a big mistake.

The US market is bad enough without making matters worse by ordering a useless newsletter.

Thanks a bunch!!

Raynald Lachance
Guest
0
Raynald Lachance
July 6, 2008 10:07 am
Hi all! I am always amazed to see such a number of free investment letters where the guys (sometimes ladies) make one believe that he (she) will get rich in no time flat. I would be very interested in knowing if they thmeselves put their own money into those investments. Of course they don’t and if they do, they surely do very little. I often wrote to those fellows in the past to ask them general clues on their positions and how well their investmetns were doing. Never got an answer … obviously! What they wwant is free money, read… Read more »
Robert Chamberlin
Guest
0
Robert Chamberlin
July 6, 2008 11:21 am

I’ve learned to be skeptical of “opportunity” news letters, relating to health, investment, wealth, and travel. Most seem to hype their own pills, travel packages, other newsletters, or add-on software to their basic programs which will multiply your profit.
Thanks for the precise look at these issues.

Rob Chamberlin

Jason Jegge
Guest
0
Jason Jegge
July 11, 2008 9:33 pm

I’m with Mary – what is the best newsletter out there?
Thanks for your fantastic and clarifying work all!

Ted Smith-Matthews
Guest
0
Ted Smith-Matthews
July 12, 2008 5:09 pm

I just received a thick envelope from Stansberry & Associates. You know the rest. As my sons would say,”thanks for the look out”.

Marian
Guest
0
November 6, 2008 12:00 am

CCF is given to you in the curve coding ..

amenodimeno
Guest
0
July 31, 2009 12:52 pm

That’s good man, keep it going.

amenodimeno
Guest
0
August 5, 2009 6:17 pm

Good story for me but please more details.

Charles K
Guest
0
Charles K
July 6, 2008 8:45 am

Is the bridge you are offering for sale or for jumping off? Anyone buying these so-called “Commonwealth Shares” will soon be wanting to hang the salesperson from said bridge – then jump!

Jay
Guest
0
Jay
October 19, 2009 3:57 am
I believe I was the first to ask Stansberry about commonwealth shares. They explained this very clearly. British were in great trouble and Pres. Ronald Rweagan and Margret Hatcher met together to see how the USA could help them out. As a result Americans were given the right to invest in commonwealth shares. At that time The British government owned everything such as utility co.s, airports, etc. This was when the British Empire included Hong Kong, , many islands like Australia which is still paart of the commonwealth. When the lease expired for the British to rule Hong Kong was… Read more »
Renee Simao
Guest
0
Renee Simao
July 6, 2008 3:38 pm

I am a writer and Daily Wealth uses a writing formula which is taught in courses published by AWAI (American Writers Artists Institute) for sales letters. This initially made me suspicious. An investment broker is an investment broker not a copy writer. So an investment broker’s newsletter would, of course, be well written as they would know grammar but it would not be “sales copy writing”. Renee

Mary O'Connell
Guest
0
Mary O'Connell
July 11, 2008 2:22 pm

I was real tempted to buy this newsletter from S and A. but thanks to the Gumshoes my curiosity has been satisfied. Is there any newsletter out there with worthwhile recommendations? Can you trust any of these writers or is it all just Hype.

Dave Chance
Guest
0
Dave Chance
July 20, 2008 12:11 pm
I have done quite well over the past 2 years with Capital & Crisis and also Mayer’s Special Situations, both of which are written by Chris Mayer and are both part of Agora Financial,LLC. I have also done well with Outstanding Investments, which is also a part of Agora. No, I don’t work for Agora. I first subscribed to Capital & Crisis, liked the writing style and research, did well with their suggestions and went on to the other 2 letters from there. In this horrible market I am down, but no nearly so much as I would have been… Read more »
Jay
Guest
0
Jay
October 19, 2009 4:05 am

One more thing I would like to say. When I subscribed to Commonwealth Shares I got a personal letterthat was very nice with the explanation. However, I did the Reagan/Hatcher research myself. That is something everyone should do before they invest in any stock. Research….

wpDiscuz