A 20 Stock International Portfolio I Set Up For A Friend... Thoughts Much Appreciated
June 18, 2009
– Comments (14) |
RELATED TICKERS: SLW
, AUY
, POT
Tickers: SLW, AUY, AEM, JAG, CEO, RDSA, SU.TO , PWE, NUF.AX , MGO.TO, GENZ, RIG, COS-UN.TO, ABB.AX/ VT.TO, PM, FNV.TO, and 1 TBA , Any Suggestions??
A Friend of my (who is an engineer) asked me to allocate a rather large sum of money in a large diversified portfolio (in terms of industries and countries). Even engineers have realized the majority of money managers are nothing short of used car-salesman. When I was an undergraduate I saw many brokers, even some who managed 10,20,30..1000 times more money than their skills warranted, relying on morningstar, valueline & S&P rating when picking equities. That being said, I had no problem agreeing to his request. Though I am doing this for two other friends since January, this is the first time I have composed such a large portfolio as I tend to focus on a handful of industries and can only responsibly keep track and evaluate (both qualatatively and quantatatively) a given number of different stocks. Please share your thoughts/comments/reccomendations to that mentioned below and/or your personal favorite in that industry and if possible which ones are trading the furthest below their intrinsic value and (in addition to what you determined that value to be).
Silver Wheaton - This needs no explanation by me as I have written extensively on silver and SLW in general. i have also posted various valuations models with updates for their recent aquisition of silverstone.
Yamana - I have written perhaps more on this than silver wheaton and posted updated valuation models both before and after their recent divesture of there three medicore mines
Agnico Eagle - Again In depth analysis and valuations on a previous post.
Jaguar Mining - Finally, The last of the miners and in my opinion, the one with the most upside potential.
Franco Nevada- Is a Royalty Company (larger in terms of streams and prodcution than Royal Gold), which receives 65% of revenue from Gold, 25% from Oil and Gas, 5% from Potash and 5% from Plantinum
Oil - I Have Initiated 40% of Target allocation as I belive oil will pullback before moving higher 5-
China National Offshore Oilfields - Great Valuation in addition to have a rather large stake in China Blue Chem, which provides a broad range of agriculture products and services
Royal Dutch Shell - Good Valuation with a nice dividend for income-
Transocean - I have just began initiating this position, and will only add on pullbacks. Although I think this stock is a gem because deep-water drilling is the sweetspot in the industry,incredible returns on tangible capital, a beautiful DCF model using very conservative estimates and of course their qualatative characteristics.
Suncor- I am very excited about the merger with Petro-Canada. Not only is the valuation attractive but they now have exposure to oil, natural gas & the Oil Sands.
Canadian Oil Sands Investment Unit Trust - This stock is very hated due to the fact the common ignorance surrounding the oil sands in general is misguided. Yes it is true they have operating margins below the industry average, but if you believe Oil is going back over $100 (and closer to $200 a barrel over the next 2-4 years), the lower operating margins are insignificant. I say this because COS-UN.TO has an enormous reserve base which more than offsets the margin difference. Not to mention the Synacrude project which they have 37% working interest in will have an extraordinary IRR. This negative sentiment is priced into the stock, which makes it that much more appealing.
Pennwest Unit Trust - Great Valuation as it over-reacted to the oil trusts losing their tax status in 2011. After it fell like a rock, the dividend yield will be almost identical to before the announcement, so either it will payout a nice dividend or price appreciation will make it an average oil divdend. Either way the price is right.
ABB Viterra - I had been reasearching the grain market last fall and saw a very lucrative industry going forward. The valuations, however, were nothing to write home about until last Dec, Jan & Feb. At this point I personally loaded up on ABB Grain of Australia which quickly grabbed 55-60% of the grain market after the Australian Wheat Board monopoly was broken up. I had also had my eye on Viterra but was hesistant to be as aggressive as I was with ABB, because the market price was trading much closer to its intrinsic value relatively speaking (although it was still a buy in my mind). Luckily about a month ago, Viterra made a $9.50 bid for ABB, nearly doubling my original return on investment. After doing the proper due dilliegence, the combined company was now incredibly attractive due to the risk reduction (it is more likely crops to be ruined if located in only one country), cost cutting measures, a worldwide reach on the Industry and of course the leverage they have to wheat prices. (The production-consumption gap has been narrowing year over year for nearly a decade).
Migao - This is my favorite agriculture company, with ABB Viterra coming in second. They are trading less than 9 times enterprise value, operating income having a 40-65% 6 year CAGR assuming Potash prices remain subdued at $550/Ton (a far cry from last year's $1000 high). In the next 14 months alone they are expanding capacity 75-80%. This is a 5-10 bagger if I've ever seen one, and I'm not one for that bold of a call.
Chaoda Agriculture
Nufarm - Second best agriculture company in Australia (in my opinion) trading at a great valuation. Still attractove despite the large run-up
Potash - from my financial blog site "1) WHAT IS POTASH? Broadly speaking it is a very important fertilizer used in the agriculture industry. Some attributes include improving water retention, crop protection, maximizing the yield of a harvest, etc. Potash mines are located primarily in Canada (The largest being located in Saskatchewan), Potash being the largest producer. Other large companies are making attempts are BHP Billiton as this Australian based company realized the future importance of this product. It’s not like BHP doesn’t have enough on their plate as it is, but like great company, takes advantage of every opportunity should the arise.
2) OK, I KNOW WHAT POTASH IS, SO WHAT? Well as emerging countries industrialize thus increasing the standard of living, the demand for potash will increase as these societies demand safe nutrient rich agriculture product. Despite alternatives for this fertilizer, the market has shown its desire by the high corresponding demand. Potash is not an extremely rare product, but it certainly has a supply constraint which will tighten as the years pass. In short, here is another example of a necessary everyday commodity that has an increasing demand that will outpace the diminishing supply
Phillip Morris Int'l - Good valuation in addition to a 5.2% dividend yield
Denway Motors - Major Auto parts supplier in China.
Genzyme From my blog site -This is another overlooked stock as many people don't understand the strategic brilliance, they have executed to position themself unlike all the other biotech giants. Genzyme, who had a very broad range treatments, catering to numerous “niche” markets is the company I’m making reference to. This strategy was unprecedented until recently as they target those diseases that strikes a very small part of the population. This, however, has given them “fast track status” on the majority of their drugs, referred to as “orphan drugs”, consequently resulting in longer patent lives than the industry average. Genzyme began moving drugs onto the market that treated a select few with some type of rare disease, but have gradually brought bigger and bigger drugs in front of the FDA with remarkable success. Over the last 2 years they have successfully brought 3- mini blockbuster drugs on line with several more in the pipeline in addition to some real blockbusters in the oncology arena. Unlike other mega biotech giants like Amgen whose main focus is in a single specialized area (that being oncology for Amgen), Genzyme has a very diverse portfolio in terms of treatments afflicting main medical arenas. Their target market covers 6 main areas including cardiovascular disease, renal disease, Diagnostics, genetic disease, bio-surgery & most recently Oncology (which they have achieved enormous success in the small time spent here). They have built up a strong capital position before entering the world of oncology as the research tends to be expensive relatively speaking. They have done this through exploiting various niche markets as well as making contractual strategic alliances with such companies as Isis (The leader in the development in RNAI technology, which the scientific world believes is the future for cancer treatments). I think they have the best pipeline in biotech land, hands down. They have 11 drugs in stage 3 of the FDA drug approvale process, 24 in stage 2, 11 in stage 1 and many more in development. They also have taken pressure off their previous flagship drugs via approvals of Myozyme, Mozobil and Fabrazyme. Their pipeline is so impressive because it covers (Huntingtons disease, Crohn's, Kindey failure, AML, small lung cancer, parkinsons, MS, high cholestoral, breat cancer and many others. This valuation is great as well, as I think the pipeline is worth more than the current market value of their company $14 Billion.
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