Showing posts from July, 2007

My present interest

Here is what I am concentrating on right now. Revlon (REV) I removed Revlon (REV) from the main list of stocks I was tracking as an opportunity. I have some corporate governance concerns. The majority owner, Perlman, may own most of the bonds that are hampering Revlon right now. It is quite possible that Perlman may not care about the stock performance as long as Revlon keeps paying interest on the bonds to him. I took a quick look and I can't tell how true this is, but it is good enough of a concern for me to ignore Revlon as an investment. Spectrum Brands (SPC) SPC has been hammered in the last month (what else is new?) and is finally approaching attractive levels. The company is trading almost at book value now (according to Yahoo Finance numbers (need to confirm manually)). Needless to say, this stock will become attractive if it drops significantly below book value. The debt problems make this a very risky company, but I am attracted by the fact that they are in the consumer s

All-time Wealthiest Americans

I ran across a good interactive display showing the wealthiest americans of all time. You may find it worthwhile to take a quick look. I find a couple of interesting things. A lot of the wealth charts just plot net worth in inflation adjusted terms, but this New York Times analysis measures inflation-adjusted wealth as a percentage of the economy. The top 5 according to this are: 1. John D Rockefeller (1839-1937) - $192 billion 2. Commodore Cornelius Vanderbilt (1794-1877) - $143 billion 3. John Jacob Astor (1763-1848) - $116 billion 4. Stephen Girad (1750-1831) - $83 billion 5. Bill Gates (1955-present) - $82 billion (Source: New York Times, July 15 2007) The interesting thing to note--something that most people probably already know--is that most of the wealthy people are self-made entrepreneurs. Many on the list seems to have cornered a market, whether it is computer operating systems, or railroads, or steel. Some of these people used unethical and possibly illegal means (fortunate

Big sell-off!

The market had a huge sell-off today (it also dropped sharply on Wednesday). Practically all asset classes and sectors, ranging from gold and commodities to foreign markets to big-name S&P 500 companies were sold off. Although the correction was pretty big, it isn't anything big in terms of the advance the markets have had this year (most are still up a lot, with the Chinese market up in the stratosphere somewhere). A couple of assets/sectors that rallied today (from my quick look) were US treasuries and the Yen. Since there are so many cross-currents in play (eg. rise in high yield bonds, housing sales & price decline, weakening currencies) it is hard to say if there is one major cause. The debt market is re-pricing the higher yielding bonds, which had ridiculously low yields IMO. The CLOs (collatoralized loan obligations) seem to have had a rough time lately , and this may be the end of the LBO boom we have been seeing. LBOs have been responsible for some of the appreciat

An area to watch: 2000 tech high flyers

A contrarian area that I am watching is the tech high flyers from 2000. You know...those companies with ridiculous valuations back in 2000... at least the ones that survived and are big. I'm Canadian so I'm paying particular attention to the Canadian ones that fell from their lofty valuations. In particular, I am keeping an eye on networking/telecommunications companies like JDS Uniphase (JDSU; TSX: JDU), and EMS (electronics manufacturing) companies like Celestica (CLS; TSX: CLS.B). Some of these have fallen 90%+ from their peak and still aren't attractive. One of the problems is that their margins are still low, while having massive capital requirements. Celestica seems to operate on thin margin while requiring billions in plant & equipment investment every few years. To make matters worse, some of these are cyclical so any economic slowdown will hurt them. But all these issues present an opportunity. It's generally good to buy cyclicals when the P/E ratio is high

Japanese consumer lending profits fall

Aiful, one of the big consumer lenders, reported declining profits . The market is not reacting much, with the stock down less than 0.5% (probably impacted by big decline in the US markets more than anything). The fact that Aiful's stock didn't move much implies that the market has priced in a lot of negativity into these stocks. This is a good contrarian sign. I haven't purchased Takefuji yet (my account is being set up--slow) so I'm not sure if I should wait for their earnings call in early August or buy it now. If the broad markets correct, the Japanese Yen may strengthen so the decision isn't obvious. This is a long-term pick so it doesn't really matter but I like to gain/save as much money as I can...

New York Times... Getting Cheaper

Newspapers are facing their worst crsis since The Great Depression, so this is one area to look at for contrarian investors. One of the problems in this area is that the premium newspaper stocks (these are the ones I would look at since they are the ones that can easily transfer their brand online) tend to trade at high valuations. Similar to other glamour industries like sports teams, newspapers have always been given a high valuation by investors. So, even though papers are facing a big crisis, they are not necessarily attractive. One of the ones I find attractive, New York Times Co (NYT), is trading at 4x book value for example. Nevertheless, I think the valuation is getting cheaper and will hit a point where it is worth looking into. Here is a 10yr valuation comparison courtesy Morningstar : Although price-to-book-value is still high, price-to-sales and and price-to-cashflow are hitting more attractive values. I think Price/Sales below 1, which may happen soon, will make this compa

Good interview with Bill Miller

There's a good interview with Bill Miller from Money magazine . Thanks to Value Investing Resource for pointing it out (this is one of the best value investing blogs covering daily news and events--I highly recommend it). I personally consider Bill Miller to be one of the smartest investors around. I can't think of too many others who are highly intellectual with a broad knowledge base (his philosophy background probably had something to do with it--every philosopher-type I meet exhibit broad thinking). Here are a couple of comments, although not radically new, hammer home some value investing points: If you have a valuation discipline, then you know that stock prices change more rapidly than business value. You also know that rising stock prices mean lower future rates of return and falling stock prices mean higher rates of return. So I was much happier in the summer of '02 when you buy everything on sale than I was in the Spring of 2000 when a lot of things were super-ex

Scandal in the works? Southwestern Resources (SWG.TO)

A scandal seems to be unfolding at Southwestern Resources--a junior gold miner from Canada. Here is a Globe & Mail article on the unfolding story. The stock was down as much as 80% yesterday but has recovered some of the losses today. It is still down more than 50% from a few days ago. I'm neutral on the gold sector right now and would be careful given the rally in gold in the last few months but this stock looks attractive from a book value point of view. The stock is trading close to book value (C$2.38 based on 3/31/07 balance sheet) right now, and it was below book value yesterday. No debt and around $50m cash on the books. Investors had a great opportunity to pick up the stock way below book value yesterday. There is risk but if one can get it at a low price, it isn't so bad. The big risks now are (i) management cannot be trusted (they took months to disclose the discrepancies) so who knows if the accounting statements are cooked, and (ii) there may be lawsuits that ma

Newsprint forestry stocks and newspapers

I have been tracking Abitibi (NYSE: ABY; TSX: A) for a while now. Canadian forestry stocks, newsprint in this case, have been struggling mightily for years. It's totally out of favour but risks are high. There seems to be no end in sight for the newsprint consumption decline. In fact, I'm going to wait and see given that the newspaper industry is still posting some horrible numbers. Newspapers are facing their worst crisis since The Great Depression and it's not clear that circulation decline will end any time soon. With the housing decline, real estate ads, a big chunk of their ad income, are falling. As long as circulation keeps declining, I think the newsprint forestry stocks will face difficulties. I haven't looked deeply at the newspaper companies but that's another contrarian area. The fortunes of the newspapers and the newsprint industry will rise and fall together. One reason I don't like the newspaper industry is because their valuations are still high.

Suruga Corporation... Japanese real estate

I'm not sure if I'm late to the party (likely not, given that the Japanese market has been in a super-long bear market), but I'm looking at Japanese real estate companies. I was actually looking for low P/E stocks and noticed some real estate companies trading at low (trailing) P/Es. Real estate is cyclical so low P/Es don't necessarily mean they are "cheap". There is also some concern that the real estate market has peaked worldwide. My view is that even if real estate slows down in USA and in emerging markets, Japan should still see growth. After all, Japanese real estate did not join the rally in the other markets. Aging population in Japan is a negative for real estate but the positive economic news should overpower that IMO. Anyway, the company I'm most interested in is Suruga Corporation (TSE: 1880), a small-cap trading at a trailing P/E of 4.6, P/BookValue of 0.7, and Debt/Equity of 1.2 (these numbers need to be verified since there was a stock spli

Stocks I'm looking at

While I try to set up an account to buy Takefuji, I'll be looking at these stocks: SHOE, OSTK, ABY (TSX: A)...

Evaluation of Takefuji

I evaluated a Japanese high-risk consumer lending company called Takefuji and am planning to take a position in it. I tried posting the report online but it's too big and formatting isn't the greatest but here it is (if anyone wants the PDF doc e-mail me): Takefuji (JP: 8564; TAKAF.PK) Investment Evaluation Written: June 27, 2007 Last Updated: July 17, 2007 Sivaram Velauthapillai (sivaram.velauthapillai[AT] I’m just a newbie investor with a contrarian tilt so feel free to e-mail or post comments to correct any mistakes or to improve things. Do not blindly base any decisions on anything I say; I don’t know what the hell I’m doing ;) . Also, since I write over a period of time, some facts and numbers may change from when I first looked them up (this is definitely the case with any market-price info e.g. P/E ratio). Summary Takefuji is a Japanese financial company that provides lending to high-risk consumers. It provides high interest unsecured loans to consumers who obv

Welcome to my investing blog

Welcome to my blog catered towards contrarian investing. Being contrarian, for those that are not familiar, means going against the crowd--not for the sake of doing it but to make a profit primarily based on human psychological weaknesses (also known as greed & fear :) ). A Bit About Myself I'm 30 and my life sucks right now. No other way to say it. Nothing physically bad is happening but my personal love life is going nowhere (if you are a man and shy, might as well kill yourself ;) ), my job is low-paying (entry-level salary) and boring as hell, and quite frankly, I am bored with life (never happened to me in my life) . Things can of course be worse. Investing Style I have a small portfolio and been investing for a few years. After going through several investing styles, I am starting to concentrate on contrarian investing. I have invested in out of favour sectors and stocks in the past but am finally trying to master that technique as my main investment style. I have had mix