My best choice for year 2010.
I started this turbulous year here posting again and again for you how important I felt it was to just hang- on to our perceived good fundamental Thai stocks. Collect the dividends and just wait-out the western induced global financial crisis. Investors whom panicked out, regretted it later.
I told one member and a long friend which was obviously distressed seeing the SET tanking from around 700 to 380, that he should just take a long holiday, stop thinking about it and use this time for personal development as he best sees fit. Not that I thought he needed it, but sometimes “no action”, is the best action. For the first part of 2009, the best action, was just remaining fully invested.
During the first half of this year, besides remaining invested, I pounded the table along with lots of research on LVT. Stating more then once here that LVT would likely turn out to be an important stock choice for us in 2009. It was. While I got much frustrated with this company as we all saw, it turned out to be a winning pick in that during our time it by far beat the SET index and even more so, the MAI index benchmark. With a near doubler at hand, I then advocated taking profits on LVT and walking away.
While others did not work out, I pulled the plug on TRC in the 3Q. and MBAX almost a year ago, when some members accompanied me to their factory tour. MBAX turned out to be a lemon during our time and it was not unwise to just walk away long ago. Of course UKEM, QLT, TTCL, SAT, DEMCO, CPALL, TNDT and others worked out well. The jury is still out on CRANE but as stated this one I am hanging on to as its a very asset rich company. SGP (7.35) I am a bit less exited but after the stop loss out, I am content having gotten it back around 7.10.
But enough of this memory lane regression, as surely I will have some other examples here to reflect back... but now we want to look forward. I mentioned in the just previous article for you how difficult and yet important it is to trim losers from time to time, while at the same time not turning impatient. We all incur dogs from time to time. Yet, CRANE and TRT are 2 examples I am willing to be patient with.
Today and looking forward to year 2010, I want to re-mention again HANA (20); this newer selection moved up some 6% since I picked it up, even while the SET index has stalled. HANA is a very high quality company with competent management and a history of good shareholder relations. The company has a leadership position in what it does and when compared to others in the region it has far less leverage, higher dividends on a % basis and a far lower p/e ratio. Here is how one member posted in our lounge on HANA, and I much agree:
“Good pick. While I don't know their business well, just based on the numbers (return on invested capital, margins, etc.), this company has been among the best in the world at what it does for a long time. The only publicly-listed competitor in the same league in terms of profitability is Powertech in Taiwan. And unlike Powertech, Hana has never been overleveraged and consistently pays a good dividend. Richard Han, the CEO, inspires confidence.
A couple of years ago management proposed to issue a large number of warrants to directors and employees. But when a significant number of shareholders opposed this, they abandoned the idea, even though they could have pushed the warrants on through. That's refreshing -- usually insiders don't treat minority shareholders so well. “
This company has no debt and over 4 bill. Baht in cash and should yield around 6.4% in dividends on the current price of 20. The 3 Q. earnings report was just about excellent, considering the world deluge. I do believe that many electronic companies are now turning the corner and that Hana, listed already in 1993, should lead the upturn. In past cycles it was always profitable to own firms in this industry, early-on into to the recovery.
Hana makes parts for computers and mobile phones including Apple’s iPhone, it has restored its workforce to pre-crisis levels and will spend about $20 million by March 31 ’20, to expand capacity and meet rising demand, So said Chief Executive Officer Richard Han said Nov. 17.
Hana's web site you see here:
http://www.hanagroup.com/
And the SET highlights on Hana are here:
http://www.set.or.th/set/companyhighlight.do?symbol=HANA&language=en&country=US
With an expected p/e of only 8 next year, I find it undervalued for such a high quality growth company. And dramatically so if you compare it to other such similar firms outside Thailand. I added HANA to the model portfolio as here so posted on November 12 at 18.70).
Here is how I would sum it up: 1) strong outlook for 4Q. 09, 2) new projects on hand with high potential growth in the future, 3) very strong financial status and 4) attractive dividend yield.
I plan to visit HANA in early January so to understand them better, so stay tuned. Everybody seems to talk/want energy stocks again, but I am overweighting with picks like HANA while always advocating a diversified portfolio.
Best Regards,
Paul Renaud.
