Saturday, March 16, 2013

Hot Companies from Cool Places

Except for 30 odd companies in mid cap space I don't find many bargains purely from financial screeners on any side of the ocean. Could be a case of poor vision as aging taken on its toll on me or the fact that I am not in touch with markets (have not seen TV in ages) and certainly don't know the anchors who don't own shares but do hold the fort on investing.

India has been one of the poorest performing stock markets this side of calendar but now offers some value in small and mid cap space. 

In gratifying exploration for the bargains I unearthed a few valuable rocks.

May the patients rest before finally resting in peace

I found Zero bargains in United States and feel that we are likely to have an encore of 0% S&P returns from 1999-2012 yet again for at least another five years with a few exceptions obviously (I almost have to throw exceptions in there, don't I want to be right when predicting !) . Almost everything is super expensive for those that are not yet in billion dollar club.

Found an interesting company which is a market leader in hospital mattresses, ticks the value investor boxes, capital preservation and some nonsense jargon like a palatable 10 PE multiple.

About the dead certain events

Father Lynch gave us flowers in the desert (Symphony Ltd) and corpses in the garden. On that note I discovered a market leader with cutting edge bacterial decomposition occurring naturally under the ground with latest strains of bacteria acting on dead bodies. If it sounds eerie, it is.

This market leader with over 50% market share in cemetery in prime cities has outperformed most Australian stocks. But Ozzies having fat wallets and raked in bundles by selling mountains of dirt and dust to the world don't leave things cheap on stock market for sure deals such as this stunner.

Unfortunately this steady business will come dear at 26 times earnings.

Provides funeral, cemetery and crematoria services in Australia. Count on this before you count on Daburs, Colgates, and ITCs, okay ITC is a friend, it helps grow this business.

Wondrous Wealth in a Remote Island

I like un-earthing stocks that are not on the published map in India. This prompted me to further research into geographies that are not in radar of Fund Managers. That would mean non-radar stock squared, works better than cocaine for me, prompts me to pray for extra long life just to be able to compound the wealth.

The best company I have found in a while is a billion plus dollar entity that contributes to 10% of Papua New Guinea's (PNG) GDP. In these island economies, the best part is, a number of large companies end up taking the mantle of a natural monopoly.

When Warren Buffett spoke about Island A and Island B and likened America to Island B; and that Island A inhabitants who enjoy trade surplus would gradually take over assets of latter, we want to buy stocks in Island A. It is not without reason that Buffett burnt jet fuel, time and effort in combing through Germany.

Investor is in for a two fold treat if a right stock is selected, investment performs well and foreign currency will outperform local currency over time. Unfortunately Germany does not have the luxury of Deutschemark (sorry Hitler) and PIGS are pulling it down. But there is not such problem with other countries without currency union where trade surplus does not get shared with slackers.

Going to the past

Wouldn't it be great buying into IT revolution knowing who the winners would be, or supermarket chains knowing they over take the rest or McDonalds in 70s or Infosys in 1990s. Going to past may not be possible for most of us without superhuman ability, but we can go to the places on this planet which look like the past. PNG gained independence in 1975 from Australia (great, 30 years even behind India !). With only 15% urban and 85% rural and a mind numbing trade surplus of 1.5 Billion - 3 Billion $ on GDP of 12 Billion $ makes it better than even Germany in relative terms.

I suggest you go through the annual report of TATA SONS of PNG (Steamships Trading Company Ltd), the biggest conglomerate of PNG and is likely to have more companies in few years and projects than we can count. It owns 50% of hotels in PNG, 50% of Colgate-Palmolive, 50%+ shipping business in PNG, Supermarkets, Warehouses, 20% IT business in PNG+ lots more, all for about 1 Billion Australian Dollars. Makes me feel like we have a better bargain than buying into Buffett Partnership in 1960s.

While the stock was available for 2$ few years back and 26$ last year, at this price of 31$, I still consider it a bargain. When you are done investigating the company, you'll realize that it is owned by a 200 years old respectable ancient business group which owns numerous businesses like Cathay Pacific, Coca Cola bottling in the US etc.

Parent of TATA SONS, sorry Steamships Trading Company

Steamships Trading Company, itself a 93 year young toddler

If you like HDFC Bank in India then chances are that you would swoon over BSP Bank in PNG that has 52% market share, awesome management, great dividend all at 10 PE. Figuring out how to buy this stock. Check the quality of Annual Report and transparency, needless to say monopoly !

With Steamships, it has a dual listing on ASX Australia besides PNG.

India offers a bargain

I have no game plan other than continuing to add to existing hottest ( cheapest) stocks, i.e. Gulshan Polyols, Vikas WSP, Zylog, Infinite Computer and unstoppable growth stocks like Thangamayil, Cera Sanitaryware, Bajaj Finance.

Stay off the grid and get rich !