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Cornelius Chan Blog

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Weekly Bargain Bin Blue Chips Update Q2 Week 13

158 views  2012-06-29 16:41   Tagsblue  chip  dividend  bargain  bin 

Blue Chip Stock (my def.) = Minimum market cap 1B + Minimum 10 continuous years of dividends.
Market Price = Book Value + Premium for future growth.

The Dow closed at 12,880.09 today, up +0.88% from two weeks ago (I skipped last week's blog - sorry!). The DJIA is up +94.36% from its 5-year low on March 6, 2009 and down -3.44% from its post '09 high of 13,338.66 on May 1.

Since the Dow is still high, I conclude that the stocks in my bargain bin list are either weak fundamentally or are in an industry/sector/subsector with weak fundamentals. Currently the list contains only financials, all from Europe. As time goes by and the Dow inevitably drops down to levels reflecting an economic recession, I expect more stocks to fall into this list, most likely starting with what are even now the weakest fundamentals banks, real estate conglomerates, oil & gas companies and basic materials companies. One interesting point I noticed about the last downturn from '07 - '09 was that many of the oil & gas and basic materials stocks either bottomed in Fall of '08 before rebounding, or they double-bottomed, first in Fall of '08 and again in Spring of '09. Either way, they led the last downturn in bottoming first. Not sure if this will happen again this time around - keeping a lookout for this type of behavior.

The following blue chip stocks deserve honorable mention for their proximity to half of book value. This week's list contains 6 stocks from the Americas, 15 from Asia and 11 from Europe. Of these, 10 are within the 0.5 range of price-to-book ratio: HNP, HLDCY, SWRAY, MTU, NTT, SNE, DEG, NOK, VE and REPYY.

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