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Weekly Bargain Bin Emerging Blue Chips Update Q3 Week 6

161 views  2012-08-10 03:56   TagsWeekly 

Emerging Blue Chip Stock  = min. market cap 100M + min. 2 continuous years of dividends within the past decade.
Market Price = book value + premium for future growth.

This is the first time I post my list of emerging blue chip stocks. The emerging blue chips are basically the well-known, high quality companies that fail the blue chip test. These companies are small to large cap and have paid continuous dividends for at least two years in a row within the last ten years. I think the intelligent investor should be able to look at both lists of different investment grade stocks (blue chip vs. emerging blue chip) and think for himself what is a good company, what is a bad one and what is just a mediocre one and how that relates to the stock action. The increased number of stocks also provide opportunities to better understand the performance of quite a few industries. Up to each investor how to process his own system of investing.

Bargain Bin Emerging Blue Chips

End of sixth week Q3 sees 26 stocks trading below half of price-to-book-value: 5 from Americas, 8 from Asia and 13 from Europe. This is a substantial array of diverse undervalued stocks. It will take me some time to sort them into their respective piles: good company beaten down, bad company beaten down, mediocre company beaten down etc. As a general rule, one could say that at the highs of the current general market (13,000+ DJIA), a stock that is exhibiting low price relative to market and low p/e and p/b to relative market is a poor buy candidate due to the possible and likely presence of impaired fundamentals. However, I am positive that there are a few companies in this list of emerging blue chip bargain bin'ners that some years from now will be trading at prices which only contrarians will have cause to celebrate.

Near Bargain Bin Emerging Blue Chips

Meanwhile, the following 28 emerging blue chip stocks are trading below 0.8 price-to-book-value.


Of the seven stocks from the Americas, I like reinsurers such as AHL, I like undervalued gold mining companies such as KGC and cement companies such as CX (although I prefer CEMTY to CX), I like strong Latin American banks such as BFR (although I prefer banks from Chile or Brazil), I am not sure about paper companies such as FBR and I definitely like oil & gas companies with strong fundamentals such as PMG.


Of the eight stocks from Asia, I like the two emerging blue chips from China (ACH, SHI), Indian telecom (MTE), Korean banks (KB, SHG), Taiwanese tech (UMC) and Australian miners (AWC). I don't like most stocks from Japan because of big troubles coming coupled with slow growth.


Of the thirteen European near bargain bin'ners, the only ones I don't like (because of industry crisis) are the banks. The rest, the industrials, utilities, telecoms and even the German airline are very good candidates for fundamental analysis. It is not every day that world-class companies such as Lafarge trade at 0.67X book value (granted the P/E is still quite high). Just two months ago, Lufthansa was only 22¢ above its 2009 low of $10.02.

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