Wednesday, March 19, 2008 0 comments ++[ CLICK TO COMMENT ]++

Bloomberg Interview with Jean-Marie Eveillard

Here is a Bloomberg interview with Jean-Marie Eveillard. The interview is not too insightful except for some of his stock picks so you can skip this one if you wish. As is generally the case, when commentators say they like a stock, you need to be careful with price. It's often not clear if the commentator likes the stock at the current price or if they just like the company in general.

Some quick notes:

  1. Visa/MasterCard vs American Express: He says that the business models of Visa and Mastercard are more uncertain than Amex. I disagree with that. Yes, Amex is more diversified in having a credit card issuing operation (whereas Visa and MC generally just process transactions). But Visa and MC are like tollbooths in that they collect a fee for every transaction. Jean-Marie Eveillard thinks that the fees may go down but I don't think that's a problem. The untapped market is so huge (CC pentration in many developing countries is low) and Visa/MC have such a large barrier to entry that they should do fine. Having said all that, those are hot stocks so I wouldn't go near them unless you are a growth investor who can project growth pretty well. I like the businesses but not at these prices.
  2. Home Depot (HD): One of the reasons he likes HD is because it owns most of the real estate it sits on. He feels that this provides a cushion if things fall apart. One of my watch list stocks, Sears Holdings (SHLD) also owns a huge chunk of the land. The current commercial real estate situation is poor and likely to get worse, but if you are making a long term investment, this real estate can be unlocked at some point in the distant future.
  3. Gold: Jean-Marie Eveillard likes gold. He thinks it is attractive and acts as insurance. I used to dabble in gold stocks a few years ago and am bearish on gold, as well as all commodities, right now. There has been too much euphoria over commodities over the last few years, and a bull market that has been going strong of 8 years (it's actually 10 if you count oil's bottom in 1998) is bound to end. Commodities are far riskier than many people think.
  4. Barnes & Noble: He mentioned this but I'm not sure why some people like booksellers. Recall that William Ackman is also heavily invested in Borders Group.
  5. Japan: As I have talked about many times (in fact, Japan can become one of the big themes of my blog if things work out :) ), Japan looks attractive to Jean-Marie Eveillard. Similar to what Jim Grant was saying, Japan offers world-class industrial companies that are very cheap. Jean-Marie mentioned SMC (TSE: 6273), the world's largest pneumatic tools provider, and Fanuc (TSE: 6954), a robotics supplier that is supposedly #1 in its field. A quick look shows that P/E ratios for these two aren't too low, but their ROE looks to be above 10%. Jean-Marie was saying that even if operating earnings drop 40% for some of the Japanese companies (not sure if he was talking about these two or about others), the companies are still attractive.

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