Tuesday, July 31, 2007 0 comments ++[ CLICK TO COMMENT ]++

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 staples area, with some good second-tier brands.

Abitibi Consolidated (ABY; TSX: A)

I decided to put my analysis of Abitibi on the backburner for now. The shareholders have voted to merge with Bowater and most of the regulators seem to have approved the deal so that uncertainty is gone.

The main reason I am holding off is because newspapers are still seeing big circulation declines. The company is quite risky (and the stock price will likely decline) until newsprint consumption bottoms. The C$ has also appreciated a lot so the earnings picture is not going to be pretty. Since this is a potential long-term investment near-term earnings don't mean much, but I want some confidence that things won't deteriorate further. The biggest risk for contrarian investors and value investors are value traps. I need to be absolutely sure that this isn't a value trap.

Owen's Corning (OC; PK: OCWAZ)

Owen's Corning is going to be one of my big holdings at some point in the future. I am interested in the warrants that have a strike price of around $45 and expire in around 6 years. I am holding off because of uncertainty over housing (housing is going to continuously decline for years and I want to be sure that OC's earnings are stable). I want to buy when the market prices in a bad housing situation into the stock. The stock declined lately (likely due to housing slowdown) but the warrants didn't. My feeling (need to do a lot more work) is that the warrants will likely be profitable since OC simply needs to go up around 70% in 6 years (from say $30 to $50). You just need the stock to go up a little bit over 11% per year, which I think is achievable given OC's history prior to bankruptcy.

I have to read the warrant details more thoroughly but there is a possibility that the warrants end up worthless if OC is bought out below the strike price. I need to confirm this (I'll do this when I research this more thoroughly).

Montpelier Re (MRH)

MRH stock has declined quite a bit and is trading around book value (it had a 20% premium to book value a few months ago). I'm not sure if I should add to this stock or not. Ideally I would like to but I don't have enough money (this is what sucks about having a low-paying job). The decision is whether to start a new position in one of the stocks I mention here or to add to this. Not sure right now...

Key stocks for now

The stocks I'll be studying deeply next are:

  • Shoe Pavilion (SHOE) - the whole shoe industry seems to be suffering (look at FINL, FL, etc)
  • Guest-Tek (TSX: GTK) - I want to analyze this company before the stock halt is lifted and see if I should buy when it starts trading
  • Celestica (CLS; TSX: CLS.B) - Complicated to look at... with a whole hoard of issues... can wait on this

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Saturday, July 28, 2007 2 comments ++[ CLICK TO COMMENT ]++

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 (fortunately, ethics has significantly improved in the developed world). There are no investors on the list other than Warren Buffett. Even on the present day Forbes list, showing the wealthiest Americans (or other nationalities), there are only a few investors. The lack of investors sort of alludes to the difficulty of investing (at least at high-wealth levels). It is difficult to continuously make investments over time, and to grow large sums of money by reinvesting at high returns. Warren Buffett has mentioned this many times and it is something that actually benefits the small investor. Small investors have many disadvantages but one of their big advantage is that we can go into areas that the wealthier people can't. This is one reason I have changed my strategy to focus on smallcaps and microcaps. Once upon a time, I avoided these small issues like the plague (Pink Sheets, OTC stocks, and anything below $100 million market cap were scary to me); but these days I actually consider them (they are very risky so I still rule out most of them if I'm not comfortable).

Furthermore, most of them on the list are from the late 1800's and early 1900's. This was arguably the best period for USA, when businesses were growing, the average citizen's life was improving, and cities like New York City became the #1 city in the world (in my opinion). Even though many people consider the peak of USA to be much later on, the late 1800's was perhaps the best period for entreprenurs and investors, and the time when great fortunes were made.

I would say China is almost--but not quite--in this phase right now. Barring some massive disaster of epic proportions, the largest fortunes in China are going to be made in the next 50 years--even though China will keep growing for 100+ years. Someone looking at the wealthiest Chinese in a 100 years (using a list like this that measures wealth realtive to the economy) will probably see most of the wealthiest Chinese of all time coming from the next 50 years. I'm actually bearish on China right now (too many bubbles) but it is probably the place to be over the next 100 years.

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Thursday, July 26, 2007 0 comments ++[ CLICK TO COMMENT ]++

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 appreciation in the markets over the last few years.

The Yen strengthened sharply today and if this is a big correction then I wonder if this is the start of the unwinding of the Yen carry-trade.

It still remains to be seen if this is the start of a big correction... or if bulls will resume their run soon...

Wednesday, July 25, 2007 0 comments ++[ CLICK TO COMMENT ]++

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 or undefined, and to sell when the P/E ratio is low. If one follows this reasoning--not necessarily foolproof by the way--then these stocks are probably closer to the trough than the peak. I am waiting to see what happens to these companies when the US economy slows (as I expect). If they can get through that then it may be time to investigate them further. I am only looking at the big companies that actually have a business. The question is whether they will make any money.

If you missed the NASDAQ bubble and don't know how bad things were, just check out the chart of JDS Uniphase, which was one of the leading new economy stocks.


In present day split-adjusted terms, JDSU was $1200 back in 2000 versus around $15 right now. Want to compute the percentage loss?

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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...

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Sunday, July 22, 2007 0 comments ++[ CLICK TO COMMENT ]++

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 company attractive.

Even if valuations hit attractive levels, I may still pass on this (and other) newspaper companies because ownership is held by family members through a dual-share structure. This isn't a bad thing per se but it can lead to governance issues.

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Friday, July 20, 2007 0 comments ++[ CLICK TO COMMENT ]++

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-expensive.



Warren Buffett has remarked on the second point mentioned by Bill Miller. Buffett mentions how you should look at stock buying as if you were shopping. When things fall in price, it's a sale and who is not happy to be buying products during a sale? People should be thinking the same way when buying stocks.

Miller's point basically implies that future returns may be low. I'm bearish on the markets but for those that are neutral to bullish, I think the fact that the market returns have been so good in the last 4 years literally means that future near-term returns will likely be low.

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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 may cost tens of millions (wiping out the cash on the books that makes this company attractive). There is also the risk that gold prices may decline and cause the market to negatively re-price this stock.

If this stock trades way below book value in the future (it may depending on what actually happened over in China with their exploration), it is worth investing IMO.

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Thursday, July 19, 2007 0 comments ++[ CLICK TO COMMENT ]++

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. New York Times (earnings July 25th), The Toronto Star (Canadian), and others, still sport P/Es above 20 and price/bookvalue of 2+ in some cases.

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Wednesday, July 18, 2007 0 comments ++[ CLICK TO COMMENT ]++

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 split earlier this year and I'm not sure if the data providers are correct).

I'll do more research and post my more refined thoughts later...


UPDATE: There was a stock split a few months ago and that wasn't reflected in the P/E and P/BV figures from tse.com. So the P/E ratio is actually double what it is (around 11) and bookvalue is 1.5x so this isn't cheap as I had originally thought. I'm not going to research this stock further...

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Tuesday, July 17, 2007 2 comments ++[ CLICK TO COMMENT ]++

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]gmail.com)


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 obviously are unable to get lower interest loans from conventional banks and other sources.

Takefuji looks attractive from a contrarian point of view. The stock has dropped 50%+ in the last few years due to changes in government opinion and court rulings. Essentially, the industry lost its ability to charge extremely high interest rates between 22% and 27% (in the so-called gray zone), and the courts ruled that the industry needs to refund consumers who were charged these high rates. Nearly all the companies in the industry wrote off large losses in fiscal year 2007 (ending in March 2007 for Takefuji). Takefuji lost around 30% of its book value due to the write-off.

I came across this company from John’s blog at controlledgreed.com (thanks John)…

Industry Comparison

The consumer lending market in Japan is dominated by four companies (Takefuji is the 4th largest lender by assets). Here is a market share chart of the consumer finance industry from an Aiful presentation:

(source: Aiful Investor presentation)


One can think of this sub-sector as an oligopoly but there are bigger financial companies (such as credit card companies, diversified banks, foreign financial institutions, etc) that can enter the market. Although conventional banks have more financial firepower, the consumer lenders have a big advantage with their consumer database, history of working with individuals & small businesses, and the ability to absorb bad publicity. Let’s face it, high-interest rates gets everyone riled up (happens in Canada and USA from time to time) and some conventional banks may not want that public relations issue.


[TABLE DOES NOT SHOW UP PROPERLY]

(Source: Bloomberg.com, finance.yahoo.com, bigcharts.com, company reports)



The chart above lists some competitors. I picked a few competitors and some random companies in the sector to look at them for reference (I need to find a better US company for comparison). I am also listing some figures from 2006 since that is the last profitable period (do note that profits will decline from the 06 peak due to legislative changes).

I was evaluating whether to go with Takefuji or Promise, and like Takefuji better. Promise is more diversified and has more potential, while Takefuji is safer. Takefuji’s dividend payout ratio is around 60% while Promise’s is around 37% (for 08 estimates; Promise’s dividend in 08 is half of what it was in 06 for some reason). With all the uncertainty in this industry, and with my lack of understanding of the Japanese market, I think it’s safer for me to go with Takefuji.

Takefuji has a forward 2008 P/E of 12 (management earnings estimate), while providing a 5% dividend yield. The price-to-bookvalue is 1.3, which isn’t very cheap but isn’t too expensive either. The P/E ratio has been around 14 during the last few years, with it hitting a low somewhere around 8 in 2003. So there is room for P/E expansion back to the historical past assuming profitability hasn’t been permanently damaged due to the regulatory changes.

I don’t know this industry well but ROE is very bad at around 5% in 2006 during the last profitable year (Promise has a similar ROE). We are basically looking at a low-growth company so that’s one thing that concerns me. Profit margin, however, is pretty decent with 13.4% in 2006. But I should note that Japanese companies are not run efficiently from a financial point of view. Many companies avoid debt and don’t buyback stock or pay out dividends as much and hold too much cash compared to American companies (all of these typically depresses ROE).

Valuation

INCOMPLETE (using net income instead of FCF)

I’m having a hard time figuring out the free cash flow. I’m not sure what the depreciation & amortization or change in working capital are in the following formula:

Unlevered Free Cash Flow (def 2) = EBIT after taxes [Operating Income – Taxes] + Depreciation & Amortization – Capital expenditures – Changes in Working Capital

I’m using this DCF calculator: http://creativeacademics.com/finance/dcf.html


Free Cash Flow: 53,600 (Yen) [estimated FY08 net income; need to use FCF]
Discount rate: 15%
Cash Flow Growth Rate: 5% [5% might be a bit high but book value grew at around 5% from 2002 to 2006. Even with the loss of the high interest loans, 5% is achievable.]

Present Value = Yen562.8B = US$4.6B

Using FY08 net income as a rough estimate for free cash flow yields a value of US$4.6B. The stock is trading around this value right now. Not too cheap according to this calculation but if you think that the company will trade above book value (historically it has, and most mid-cap/large-cap companies do) then it doesn’t look too bad.

Bull Case

Long History

Takefuji has been in business for many decades so this is not some fad that is going to disappear any time soon. The owner is not part of the company so the company may have lost something over time but things still look good for the long term.

Strength

Takefuji is one of the largest consumer lenders so it is likely to do better than the competition if things deteriorate further. Some companies are exiting or will go bankrupt in the gray zone credit area (eg. Citi decided to close 70+ branches), while Takefuji may do well and gain market share. Declining industries are not necessarily bad if you are the strong one that is gaining market share.

Positive Economics

The economic situation in Japan is finally improving. Although investors have been burned many times over the decades trying to pinpoint the turning of the Japanese economy, I think it has finally turned a tough corner. Here is a chart of unemployment from the Takefuji website:

(source: Takefuji Investor Relations website)

GDP growth is also pretty good so far this year, but it remains to be seen how Japan does if the US economy slows as I expect.

2003 redux?

The stock is presently trading below its December 2003 trough of around 4800Yen. You can basically buy the company as if it were 2003. Now, what has changed in the last 4 years? Well, the company is bigger, founder has passed away, more international owners, and the Japanese economy is in far better shape than back then. For instance, unemployment rate, default rate, and consumer spending are in far better shape now than back then.

The government legislation is a big negative change but profitability should return. Perhaps revenue won’t hit the levels in the past couple of years any time soon, but as investors we are paying for free cash flow (or earnings). I can see cash flow staying strong. This isn’t some industrial giant with high capex so trimming labour and discretionary spending to account for the new environment can return things to desirable levels. So I think the situation is not significantly worse than 2003 yet the market is pricing it lower.

High Dividend

If dividend is kept at the current amount, you are looking at a yield of around 5%. This should provide a floor to the stock, and help during any weakness (possibly if the world economy slows). However, it can be costly (for small investors like me with very little money) to re-invest the dividends (I basically won’t be reinvesting and hence will lose the compounding benefit  ).

Value Investors

Value investing firm Brandes Investment from USA has a big stake so this is a positive. They seem to be very focused on producing results and taking management to task. Unfortunately, Japanese companies seem to be caught up in nationalist thinking and often introduce poison pills that are harmful to shareholders.

John from ControlledGreed.com took a position, albeit money-losing one so far. I don’t know anything about him but he seems to be a contrarian-type investor. (There is a good lesson to be learned from John’s investment for contrarians and value investors. If I understand it correctly, one of the reasons John took a stake was because the company was trading below book value (around 0.7), with lots of cash on the book. But all that meant nothing when it had to take a massive loss due to interest re-payment back to their customers in 2007. So the book value really meant nothing and the company now has a book value of around 1.3).

Potential Yen Appreciation

Although making a call on a currency can be harmful to one’s health ;) , I think there is a reasonably high probability that the Yen is likely to appreciate over the long-run. Better economic growth, potential unwinding of the Yen carry-trade, and improved government policies are some reasons the Yen may strengthen against the US$ (and if commodities slow down as I expect, against CDN$ as well). Since most of the money is flowing into emerging markets and commodity-oriented currencies (eg. Canada, Australia, Brazil), a bullish Yen call is contrarian.

The Economist’s Big Mac Index and some investment banking studies quoted by the Economist imply that the Yen is the only major currency undervalued against the US$. Makes sense... I mean, who the hell wants to long the Yen when all the hot action is in emerging markets and currencies/countries levered to commodities.

Bear Case

Declining Revenue

Takefuji has seen declining sales and income for the last few years, even before the current onset of problems. For example, revenue declined from Y428B to Y351B in FY2006. Even before Takefuji started exiting the gray loan market, revenue has been weak. (However, management expects income to go up in FY08 compared to FY06).

Further Write-downs

There is a possibility that further write-downs may occur due to the lawsuits. It looks like most of the future problems are being accounted for, but one can never be sure.

Permanent Damage to the Industry?

One of the big risks is that the industry may have changed due to the court verdict eliminating the gray zone lending. The highly profitable sub-prime segment may have been weakened. This is where Takefuji had a big competitive advantage over conventional banks. Takefuji will now have to make money off more creditworthy customers and will put them into competition with a normal bank.

Margins may decline due to the lower max interest rate (it obviously will depend on cost cutting vs loss of the super-high-yield customers). More than 50% of outstanding loans were in the higher interest rate areas so it’s not clear how badly profitability will be impacted in the long-run.

Takefuji may permanently trade at a lower market cap in the future if consumer loans are not what they used to be. Namely, if Takefuji has to compete against the established conventional banks for a big chunk of its business, it may never recover its past valuation.
No Catalyst

There may be no catalyst to propel the stock upwards. The stock can stagnate for years and the opportunity cost of that can be high. This is not a sexy industry where a new product or technique will shine the light on this firm.

Worst Case Scenario

The company may start losing more sales due to the loss of the lucrative and competitively advantageous high-interest loans. Takefuji is one the strongest in the Japanese high-interest credit area so it should not do as badly as some of the competition. I think Takefuji can actually take away some market share even during bad times. So, the worst case may simply be another 30% to 40% decline in the stock price.

Another possibility is that the stock may not recover. The Japanese equity market is already trading at a high valuation (forward P/E on Nikkei is around 37) so it is possible for the stock to stagnate for many years at these levels. Opportunity cost of holding a flat stock for years can be high.

Investment Thesis

Takefuji looks attractive from a contrarian point of view. Takefuji has a long history, is a mid-cap, and is financially stable. The company is a potential turnaround story, which the market has not priced properly.

Business should stabilize and see positive growth in a few years. The macro environment is improving, with improving economic growth and declining unemployment rate. Furthermore, the Yen is likely to appreciate in the long term.

I think it’s worth buying the stock below 5000Yen (approx. US$40.65). I’m planning to open up a Yen-denominated account and try taking a small position. Since I think Japan has the potential to rebound for the long-term, it’s worth opening up a Yen account. If the stock goes back to its recent historical average of around 7000Yen (from 5000), one is looking at a 30% return (excluding dividends and potential Yen appreciation). Organic growth and shareholder activism (seriously needed in Japan) should boost the returns quite a bit above that.

I think it will take around 2 years before the company leaves behind the legislative problems (why invest now then? well, because it’s hard to call the exact bottom; Yen may appreciate; and the market sentiment may change for the positive). Lots of uncertainty but it’s a solid and profitable business.

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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 mixed results with my contrarian attempts in the past.

I think contrarian investing suits my personality since I'm kind of a loner who is not generally swayed easily by public opinion. I just need to master stock valuation. My big problem now is that I don't know how to value a company properly. This is a problem faced by all investors, particularly value investors, and can mean the difference between success and failure. As a contrarian, I am not so concerned with pinning a value on a firm, as much as trying to avoid a big loss. I just need to get the trend correct.

Meaning of the Name of the Blog

There is a critically acclaimed Iranian film called Turtles Can Fly but this blog is not based on that title (although it may have influenced me in the back of my mind, since I recall looking at that title when I was picking films at one of the past Toronto International Film Festival). I look forward to seeing that film but this blog has nothing to do with that (I'll probably just go and buy that film now that I mention it... supposed to be a great film (sad and moving though)).

I think the animal that best represents me is the turtle. My life is always slow-moving while the faster bunnies hop around madly in love, or zoom past me with their jobs, or whatever. I'm passive and kind, just like a turtle. What I, as a turtle, would like to do is to learn to fly. By that I am referring to achieving financial independence. That is the question: can I learn to fly? Remains to be seen...

Closing Remarks

I have a habit of starting or dreaming up things but not executing on them (love life comes to mind, not to mention my career). Hopefully I will post regularly on this blog so that you may find it useful if not interesting.

If you are bored, also feel free to check out my personal blog, My Quintessence: Thoughts & Feelings, with random thoughts going through my brain...

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