Monday, August 31, 2009

Our Next-11 Portfolio

About 5 years ago Goldman Sachs introduced its Next-11 concept. The Next-11 countries were nations with a relatively large and young population and an abundant availability of at least one important resource that was scarce at a global level. This could be oil, iron or other metals, gas, cheap but reasonably educated labor, et cetera. At the same token, it was required that the political and economic situation in these countries was stable enough to warrant long-term investment.
This did not translate into an 'expected' list and Goldman was not afraid to add nations that in the short-term were even considered more than controversial, like for instance the Islamic Republic of Iran or Bangladesh.
The Next-11 countries are:
  • Egypt
  • Indonesia
  • Bangladesh
  • IR Iran
  • Mexico
  • Nigeria
  • Philippines
  • Pakistan
  • Turkey
  • South Korea
  • Vietnam
Just like we did in the Emerging Markets Winners and Losers Portfolios which were introduced yesterday, we used the Forbes-2000 list to select stocks. The IR Iran, Bangladesh and Vietnam were dropped, because we did not find stocks in the Forbes-2000 that were readily available for foreign investors and/or brokerage costs were too high.
That led us to the following portfolio:
The Next-11 Portfolio
  1. Orascom Construction Industries (Egypt)
  2. Telekom Indonesia (Indonesia)
  3. Posco (South Korea)
  4. CEMEX (Mexico)
  5. First Bank of Nigeria (Nigeria)
  6. National Bank of Pakistan (Pakistan)
  7. Turk Is Bankasi (Turkey)
  8. San Miguel (Philippines)
  9. CASH
The portfolio is again equally-weighted, with all 8 holdings receiving a 11.1% (rounded) weight. We also hold a same amount in Cash, so as to be ready to take adequate measures when market circumstances urge us to act. Obviously, this cash buffer does also have a defensive motivation: we do refrain from being fully invested in the current uncertain market environment.
Just like the portfolios introduced yesterday and Friday, this set of stocks was also acquired on Friday. During the coming months we will follow its performance and pay special attention to the firms in our portfolios.

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