There is an old joke about a guy who has money to invest, but has no idea where to put it. The guy visits the famous wise man, asking him about what to invest in. The wise man tells him: Invest either in grains or in woods. When the guy asks why, the wise one replies: because people will eat bread while they are alive and need coffins when they die. Unfortunately we don’t have any such wise men to ask about where to put our money, but we have lists of huge companies focusing on a niche. Let’s say what their choices tell us about investing.
The company with the biggest revenue in the whole world is the Sinopec Group, a Chinese oil and gas company based in Beijing, founded in 2000. According to Wikipedia, the Sinopec Group had revenues of over $480 billion in 2013 (the 2014 information is not yet available). The company is active in the oil and gas industry, one of the most lucrative ones in the world. Besides, it is the second largest chemical producer of the world, only exceeded by the German BASF.
Nothing new here – oil and gas are always in demand. Electric cars are still at an early stage of their adoption, meaning that they will probably not become mainstream for decades at least. But it’s not only cars that consume oil and gas – the petroleum industry provides the raw material for many chemical products, including pharmaceuticals, solvents, fertilizers, pesticides, and plastics.
The second largest company by revenue is America’s WalMart, with revenues of over $470 billion in FY 2014. The company has over 2.2 million employees (this makes it the largest private employer of the world), and a network of over 11,000 stores in 27 countries under 71 brands.
Consumer staples is another very lucrative arm of the global economy. After all, it represents the intermediary between producers and consumers – the manufacturers of anything from food and electronics to toilet paper and beauty products. The next few years might bring major changes to retail, though, with the internet offering a more personal and much more comfortable way to shop, so giants like WalMart might experience a reduction of their revenues in the decades to come.
Consumer staples and energy can be added to one’s investments via ETF. Exchange traded funds make it simple to add exposure to a particular sector of the economy without having to carry on company specific risk. Unless you have time to research, chose and keep up with a company, ETFs are the way to go.
For consumer staples, the XLP ETF is the biggest and oldest in the business. It has over $8.2 billion in assets and boasts a meager 0.15% expense ratio. The eTF is heavily weighted to large cap companies like Procter & Gamble, Coca-Cola and Wal-Mart.
In the energy sector, the recent downturn in the price of oil and natural gas may be viewed as an investment opportunity by investors with a long term goal. Oil or natural gas will still be part of the energy landscape in the future. According to the BP Energy outlook, fossil fuels will still account for 81% of the landscape, down only from 86% in 2012. One of the biggest energy ETFs is the iShares S&P Global Energy ETF (NYSE: IXC) with a host of energy heavy weights like Exxon Mobil, Chevron, BP, TOTAL and Royal Dutch Shell amongst others.
So, as the above two examples show us, investing in energy and retail are always a good choice. Gas and plastic are two of the most important products in our everyday lives – and the second one is available to us through retail outlets of various kinds. If you decide to invest in small cap stocks, you might as well invest your funds in an entertaining game of chance and join the fun and play mobile slots at Royal Vegas. Investing in a large well diversified ETFs remain by far the safest options for the future.
