Monday morning at the research office.
Brief update on my latest company visits and a few interesting facts, from the past, meant to raise your eyes and mind.
Among other meetings, I visited in person BH, SE-ED, TICON and TCB last week. I hope to update you on all three within 10-15 days, so keep tuned in. SE-ED, TICON and TCB remain firmly on my long term "buy view" list. However BH (26) seems fully valued to me. It"s a great Hospital/Health care company but at a fully diluted p/e of 21, it"s a bit rich for this value investor. I also well noted that BH"s tax rate will increase from 15 to 30% next year as its previous tax credits are now exausted. While BH has since become an "institutional darling" (I think Fidelity just bought 5.4%), I am tempted to view it as a "take profit", after a nice ride-up since first bringing it to your attention in year 2003.
We will see how it works out, but BH is no doubt a great company with a great professional service, yet the stock price seems fully valued. I much realize that momentum and new institutional attractiveness might well chase it higher? Yet, I stick to the enduring discipline of valuation and on that basis, I find more attractive alternatives.
Here are some interesting notes/stat"s regarding long term investing, its ups and downs, mis-perceptions and realities through some shocking facts:
--From year 2000 to year 2002 investors lost over 400 Billion US$ on Cisco alone, more then the annual economic output of Hong Kong, Israel, Kuwait and Singapore combined. Cisco was/is widely considered a true blue chip company in the high tech arena, yet turned out to be an investor dissaster over the past several years.
--On March 24 2000 the total value of the US stock market peaked at $14.75 Trillion. By October 9 2002, just 30 months later, the total value sank to $7.3 trillion, or a bit over 50%! Hence the understated US bear market has been far from confined to only technology stocks.
The current stock price of Microsoft and Nokia, two leading true blue chip technology companies, are still lower today in stock price, then 7 years ago! Nokia"s stock was trading around $60 at the turn of year 2000 -and today, and for 5 years already since, lingered around $12-18. Nokia is by a considerable margin the leading mobile telephone company in the world. Mobile phone usage have exploded in the past 5 years. Both paid a dismal, if that, annual dividend during this time. Nokia stock lost 75% of its value since the turn of the century.
While the broader market averages in the US have lost an average of 14-18% per year, since year 2000, the Thai SET benchmark index has more then doubled during the same time. And many quality growth stocks (as I here have pointed out all along) have done considerably better then the SET averages. Banpu, a long adored large cap stock here, has increased more then ten fold during this same time. Ticon, a stock selection I posted as a "maximum bullish view" a year ago, has doubled in value since.
And here is an interesting fact to bring up next time your marketing office says "that dividends don"t matter":
---According to professor Dimson, March and Staunton of the London Business School, if you had invested $1 in US stocks in 1900 and spend all your dividends, your stock portfolio would have grown to $198 by year 2000. But if you had reinvested all your dividends, your stock portfolio would have been worth $16,797$, 100 years later.
Far from "dividends don"t" matter" dividends are in fact the greatest force in stock investing!
Most all USA and EU investor perception is that investing in emerging markets (like Thailand) are "very high risk", and so best to be avoided. Better ask again, as the above shows that some of the most volatile history in stock prices recently has come from the US. In fact, US investors have just endured the greatest wealth destructions in their equity markets, ever. And this at a time, when a higher percent of the population invested in shares then ever before! Besides high taxes, the volatile US $ currency and a dismal US stock market have been the true shocking wake -up call recently, regarding US stock market investing in the recent half decade.
Many emerging markets, notably Thailand, have behaved in exact opposite of this in recent years, and so, going dead against the old pervasive saying, that "when the US sneezes, the rest of the world catches a cold".
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People who invest for the long term and for the dividends, make money for themselves. People who speculate (and trading is always a speculative activity) most only make money for their brokers. To beat the SET market averages you must keep employing strategies that are not popular by the investing public, or their brokers.
The sillier the markets behavior, the greater the opportunity for gains and on the SET, before as now, too many here have a great adoration/fixation on large cap stocks only. Hence the best investor opportunities remains in the many secondary higher dividend paying Thai shares -and so this will remain my focus. After all its about creating new wealth along with prudent risk.
Have a great week and check back shortly to see my latest company write ups.
Best Regards,
Paul A. Renaud.
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