A Big-Cap to Buy When There's Blood in the Streets
5/22/2007 1:38 PM EDT
As I outlined in that prior piece, some misguided activists are pressuring investors to sell their assets in these countries. But I argue that smart investors want to be on the buying side of pressured liquidations. Besides, if these areas are vacated by the capitalists, they'll only become more isolated.
To build on this, I've started to dig up ideas for some big-cap ways to invest in the concept. With a nod to Baron Rothschild's famous saying of "Buy when there's blood in the streets," the thesis is to buy when things are horrible (much like when I launched my tech hedge fund in October 2002) and then invest in those places as they improve. The best way to drive improvement in impoverished and war-torn areas is to make people care about them.
Getting citizens and corporations to risk their capital and look for returns in these troubled places will ensure that we in the private (nongovernmental) developed world have a vested interest in helping these areas create sustainable economies of private ownership and trade. (I refuse to use the word "free" to describe "trade" because, by definition, if two parties engaging in an exchange aren't "free," then it's not really a "trade," is it?)
Certainly, there are huge risks when investing in war-torn places. That's why there's so much upside potential, too.
Today's edition of The Wall Street Journal featured an article about Total, which underscored why this company based in, yes, France is one name on my list.
France has a long history of colonization in Africa, and Total, which bought its French competitor Elf in 2000, has long invested in oil discovery in Africa. Indeed, the article nails exactly why investing in, say, Darfur -- where civil war and genocide run rampant -- carries so much potential upside: "But the real boost [for Elf/Total] came with the company's decision two decades later [the 1980s] to step into Angola's offshore concessions in the midst of a civil war [Italics mine] ."
Total expects to get most of its new production from Africa over the next few years. The stock is up more than tenfold since the 1980s. I do believe those are exactly the types of returns that Rothschild was talking about.
While many activist groups continue to push for divestment from Darfur, I'd be loading up on any company with the guts to step into Sudan/Darfur in the midst of a civil war. Total is not aggressive in Sudan just yet; these well-intentioned but wrong activist groups that are trying to stop private investment in Sudan are impacting all the major oil companies' thought processes about investing there. But the company is actively investing in other places in Africa.
In addition, a rush of private investment dollars flooding into such a situation would create all kinds of new pressures -- including political, media and capitalist -- that would drive improvement to the living conditions for those suffering there. All economies are only self-sustaining when they're profitable. And therefore, profit-driven investment is the best way to drive these economies forward.
How's that for some virtuous cycles that we, as private citizens, can kick off?
More information about Total as well as more ideas for good companies actively investing in war-torn areas are welcome on the StockPickr Answer board.