BHP Billiton: 2014’s biggest winner?

Happy 11-12-13!

Sadly, that’s where the fun stops for today. The ASX is again trading lower today, on track for a fifth straight day of losses.

What’s happened to the Santa Rally?

And what about December? As Philip Baker said in The Australian Financial Review

“… history says if the sharemarket is going to rise, there’s a good chance it will rise in December.”

So far, December has been a total fizzer, Ashes aside. But all that could be about to change, and much sooner than you think.

As also reported in the AFR, Goldman Sachs sharebroker Richard Coppleson said…

“We are very close to… seeing the Australian market in its strongest trading period of the year. The equity market had risen at this time of year 27 times in the last 33 years (more than 80 per cent). The strongest period this year should be between Monday, December 16, and Wednesday January 8.”

Hold onto your hats, Foolish investors. This could get exciting.

The timing of these 3 stock picks could be perfect

And if Mr Coppleson is right, and the ASX is about to take off this coming Monday, the timing of the publication of Scott Phillips’ top 3 ASX best buy now stocks could be perfect. They will be released exclusively to Motley Fool Share Advisor subscribers tomorrow, Thursday December 12, after the market closes.

How exciting could things get?

Mr Coppleson has an unofficial year-end target of 5600 points. By my calculations, that means the ASX could rise over 9% in the next 3 weeks. Happy new year, indeed.

According to the same AFR article, Deutsche Bank equities strategist Tim Baker has a year-end target of 5500 points and believes the market will get there, saying “The equities earnings yield looks exceptionally attractive relative to nominal bond yields.”

Fancy an earnings yield of 7.1%?

The equities earnings yield is the inverse of the P/E. The ASX is trading at a P/E of around 14, which equates to an earnings yield of 7.1% (one divided by 14).

The earnings yield knocks the socks off the return from term deposits, and that’s without even counting the dividends.

On that basis, it’s easy to see why the big four banks — Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank (ASX: NAB) and Westpac Banking Corp (ASX: WBC) — have had such a stellar run in 2013.

The Stock of 2014 — The Big Australian

Whisper it quietly, but next year could be the year of the Big Australian. BHP has been a notable laggard this year, down 2.6% versus a rise of 10% in the S&P/ASX 200 index.

But all that could be about to change.

Today, I can reveal I’m officially abandoning my stated $30 buy price target on BHP Billiton (ASX: BHP). Yes, I got too greedy.

BHP stock is swapping hands today at around $36 per share, down 2% on the day. At that price, BHP trades on a forward P/E of 14 and a forward dividend yield of 3.3% — pretty attractive when you consider where interest rates are now, and where they are likely to be during 2014.

I’m not backing up the Jackson-truck just yet, but mark me down as definitely interested. The more BHP stock falls, the more interested I get. In terms of index points, it just could be 2014’s biggest winner.

Keen market followers like myself will have noted, and celebrated, Wall Street’s big jump last Friday night, where the Dow and S&P 500 both surged more than 1%.

The moment when “the taper” no longer matters

There’s nothing obviously significant about such a jump until you realise, for possibly the first time, Wall Street rose sharply despite the odds of the Federal Reserve tapering their monthly bond purchases in December rising to roughly 50-50.

As John Authers put it in The Australian Financial Review

“…traders have decided the taper can be survived and an environment of decent growth and very low rates awaits. On that basis, they buy stocks.”

Everything changes this coming Monday

Seems they are buying in the States, but not in Australia — yet. Perhaps all that changes starting next Monday December 16th.

Not entirely in anticipation of Monday, when and if all goes to plan, Australia will hopefully be close to regaining the Ashes, I’m keen to add some to my own portfolio, and to our SMSF.

From a macro perspective, and compared to interest rates, the timing doesn’t get much better than this.

The Federal Reserve tapering is a very far cry from them raising interest rates. In the States, you can expect them to stay at 0% through most, if not all of 2014, and then possibly into 2015.

February’s shock interest rate cut just got that little bit more likely

Here in Australia the Reserve Bank of Australia have still got plenty of room to move to bring interest rates down even further if required.

And down is exactly where they could be heading, possibly as early as February, with the Westpac Consumer Confidence Index falling almost 5% per cent this month to its lowest level since July.

It looks like that post-election glow has disappeared faster than Joe Hockey teamed up with the Greens to abolish the debt ceiling — just in the nick of time too, given he let slip the government debt could exceed $500 billion.

And that’s before one of the world’s most generous paid parental schemes comes into force. Who’d be a politician? Who’d vote for any of the clowns, from any party? Hypocritical back flippers might be a good description for the lot of them.

Now I’ve got that off my chest…

Remember, just last month, Westpac’s Bill Evans said two further interest rate cuts will be required in 2014. They’ll be required to stimulate the Aussie economy, the side effect being to further lower the Aussie dollar.

Bell Potter’s Charlie Aitken is predicting the dollar will fall as low as US80 cents. To get there, it will almost certainly require the RBA to cut interest rates.

More pain ahead for retirees, and overseas travellers

While it will be painful for retirees, term deposit holders, overseas travellers, and shoppers, it will be a much needed shot in the arm for the Australian economy.

Speaking of the US, all this reminds me of my Nasdaq-quoted 3D printing “wonder stock”, an active buy recommendation in our Motley Fool Share Advisor subscription-only stock picking service.

My 567% winner… on it’s way to 1000%??

After a brief pause for breath, overnight, a night when the Dow fell 50 points, my “wonder stock” jumped 6%, putting my gains to date at a more than satisfying 567%. And that’s before a favourable foreign currency gain.

Deutsche Bank jumped on the bandwagon overnight, initiating coverage on the 3-D printing technologist with a buy rating, placing a target price almost 20% ahead of its current share price.

Due to the wonderful power of compounding returns, if it hits Deutsche Bank’s target, my gain will be 692%. And from that target price, it would ‘only’ take a further 26% rise in the share price to see my gain hit the magical 1000% mark, the legendary 10-bagger.

I’m not counting my chickens just yet. The gains I’ve made so far have been totally beyond my wildest dreams, especially in such a relatively short period of time. It certainly makes up for, and dwarfs, my 70% losses in Lynas Corp (ASX: LYC).

Buying US stocks is easier than you think

As a reminder, Investing in US-quoted stocks is easy. Commsec customers (no affiliation) can click here to bring up an application form. I use OptionsXpress (no affiliation), and you can click here to access their account opening application.

My 3D printing “wonder stock” is an active Motley Fool Share Advisor buy recommendation, despite it being up 140% since it was first tipped to subscribers.

Although the vast majority of our Motley Fool Share Advisor subscribers follow just our ASX recommendations, they are doing themselves a disservice. As at 29th November 2013, the average US-quoted recommended stock is up a stunning 73.6%.

There are never any guarantees, especially when it comes to timing, but with the Aussie dollar predicted to fall, and with December and January being such historically good times to buy stocks, this could be the last great chance to take advantage of the low interest rate environment and still high Aussie dollar to pile into ASX and US-quoted stocks.

Heck, even the gold miners are on the up today.

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Of the companies mentioned above, Bruce Jackson has an interest in BHP, Commonwealth Bank, ANZ, Westpac and Lynas.

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See the stocks now