Some of the best investments arise from the privatization of state-owned corporations. Government operations are not known for their efficiency, so when management is transferred to profit-seeking business executives and shareholders, the growth in earnings can be dramatic.
An example is Montreal-based CN Railway Co. (CNR). Since its initial public offering was completed in 1995, its common shares have appreciated more than tenfold.
It now appears investors and entrepreneurs are about to be presented with a wave of opportunities to invest in privatized government corporations. Most governments around the world are saddled with huge debts and deficits in the aftermath of the financial crisis and economic recession; selling assets will be one way for them to pay the bills.
We are seeing the beginnings of a trend already.
in late July, Russia announced it was planning to sell stakes in several leading (state-owned) companies, such as Rosneft (largest oil producer), Sberbank (largest bank) and Transneft (oil pipeline).
Greece is well down the path of privatizing public utilities and leasing airports, ports, railways, and highways to private firms for fixed periods of up to 40 years.
Municipalities and states in the U.S. face budget constraints and are starting to divest public services such as garbage collection, water supply and so on.