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Cheap Sectors Around the World


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Lots of small (nano?) caps in Japan.  Nothing quite like average historical ROICs in excess of 20% with EV/TTM EBITDA of 2x or less, coupled with no net debt, a P/B of < 0.5x and BVPS increasing 10%+ every year for the last few years.  In this spreadsheet I'm looking at now I'm counting five companies with those characteristics, and that's just glancing at it.

 

I don't know if that's your typical cup of tea though.  It seems like you generally like > $100m market cap companies (where you can read the financial reports)?

 

One that meets that requirement that may be up your alley is JP:6425.  There's some controversy around it currently, but it does look like they have some information in English.

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The specific food and beverage cos in Korea include Lotte Chilsing and LG H&H.  As to HK RE cos, I think it depends on the type and location of properties.  I live in Rochester, NY and the great real estate bust in the US never really happened here.  RE is also a very local market influenced by national trends.  I think the perception of an overvalued market is what in making some of these companies cheap but a good operator will able to find the good local niches.

 

 

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Packer,

 

Thanks for throwing out the topic.

 

Uranium and the coal sector are both cheap.  However the reason why I think coal is problematic is the same reason that uranium may be the right place to be. 

 

To elaborate, even though coal is cheap it does cause pollution.  China has a well-known pollution problem and at least, on the surface, they seem intent on cleaning up their air.  The reality is if they have plans to become the largest economy they need to deal with their pollution problem.  And that is why nuclear makes sense for them.

 

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The specific food and beverage cos in Korea include Lotte Chilsing and LG H&H.  As to HK RE cos, I think it depends on the type and location of properties.  I live in Rochester, NY and the great real estate bust in the US never really happened here.  RE is also a very local market influenced by national trends.  I think the perception of an overvalued market is what in making some of these companies cheap but a good operator will able to find the good local niches.

 

 

Packer

 

Packer,

 

Would you say the HK RE companies have always traded at a discount to NAV to some degree?  I owned a handful of HK RE companies back in 2006 following Third Avenue's lead but I haven't followed the sector in the last couple of years.

 

Regarding Korea, do you own the Weiss Korea Opportunity Fund?

 

Thanks,

 

AtlCDore

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The HK RE have always sold at a discount but there are some that are selling at much larger discounts now.  I have purchase Korean preferreds directly vs. WKOF.

 

Packer

 

What broker did you use for the Korean stocks?  How long did it take you to go through the filing process?

 

Thanks, AtlCDore

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The Canadian oil patch is cheap because:

 

1. Unfounded belief that the Keystone pipeline is necessary for these companies to be profitable.

 

2. Oil weighted producers being lumped in with natural gas weighted producers the latter of which are suffering from low natural gas prices.

 

 

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West would you be willing to disclose some of the other small-cap Japanese names you hold besides Fujimak? It's an area I keep meaning to explore in more detail but have always deferred on because of the limits on due diligence for an English-only speaker.

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West would you be willing to disclose some of the other small-cap Japanese names you hold besides Fujimak? It's an area I keep meaning to explore in more detail but have always deferred on because of the limits on due diligence for an English-only speaker.

 

PM me about it in a week?  I'm in the process of buying them for the (grand total of two) accounts I manage right now, but I'd be happy to disclose them all once I own them.  I've just been dragging my feet on purchasing them (... and they are a *little* illiquid... but most aren't that bad).

 

I plan on posting some of the better ones to here once I've bought them all.

 

Fujimak is still one of the best.

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The HK RE have always sold at a discount but there are some that are selling at much larger discounts now.  I have purchase Korean preferreds directly vs. WKOF.

 

Packer

 

Packer,

 

Are you ok mentioning the HK property stocks you like?

 

Thanks,

 

AtlCDore

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The specific food and beverage cos in Korea include Lotte Chilsing and LG H&H.  As to HK RE cos, I think it depends on the type and location of properties.  I live in Rochester, NY and the great real estate bust in the US never really happened here.  RE is also a very local market influenced by national trends.  I think the perception of an overvalued market is what in making some of these companies cheap but a good operator will able to find the good local niches.

 

 

Packer

 

I agree that when the Chinese Real Estate bust happens (if it does), there will be opportunities.  To echo what you said about Rochester, I had great success buying a UK RE company which concentrated on London Apartments around 2010.  Anyone on the ground could see that London was holding up well.  My concerns are:

 

1) Do we have the local expertise?  I guess that's what research is for.

2) Surely it's too early in the cycle?

 

While we are talking about bust sectors, I'm going to throw out ITE PLC, a UK company that gets over 50% of its revenues from Russia.  Exhibitions are a low Capex high quality business, with brand loyalty and highly visible recurring revenues.  You get Russian exposure and western corporate governance.  It fell 9% today.  For me, the likes of Yukos are uninvestible except as a basket, perhaps.  The reason is that profits and the shareholder are very often not the management's No.1 priority.

 

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The specific food and beverage cos in Korea include Lotte Chilsing and LG H&H.  As to HK RE cos, I think it depends on the type and location of properties.  I live in Rochester, NY and the great real estate bust in the US never really happened here.  RE is also a very local market influenced by national trends.  I think the perception of an overvalued market is what in making some of these companies cheap but a good operator will able to find the good local niches.

 

 

Packer

 

Packer,

 

What about Russia?  Are you looking at Russian stocks?

 

Thanks,

 

AtlCDore

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